Paragon urges Government to support specialist lenders

Paragon Mortgages has announced its interim results for the six months ending 31 March 2009. The results confirm Paragon's business is stable, profitable and cash generative, but the Group urges more Government support to help non-bank lenders commence new lending.

Highlights include:

Underlying profit of £18.9 million
Entire £9.5 billion portfolio match-funded to maturity
Arrears half of industry average
Good progress on new business initiatives

John Heron, director of mortgages, says: ‘Paragon continues to demonstrate the strength and stability of the business and despite the continuing difficult economic environment, the Group's financial performance has remained robust. Our landlord customers continue to experience tenant demand at record levels, and these customers are also benefiting from a low interest rate environment.

‘In addition to the management of our substantial existing assets, we continue to develop new revenue streams, including our additional services to landlords through the Redbrick range of products, which includes Energy Performance Certificates, tenant assessment and insurance. However, Paragon's core business remains the provision of buy-to-let mortgage finance to residential property investors but new business opportunities have been restricted as the funding markets remain closed.

‘Demand for buy-to-let investment is robust but investors' ability to grow their portfolios is restricted by a lack of available finance across the buy-to-let mortgage market. Prior to the credit crunch, non-deposit taking lenders played a major role in the buy-to-let market but the closure of the wholesale funding markets has inhibited their ability to conduct new business. According to independent research, available loan products have reduced by 95% during the past two years.

‘Whilst Government support schemes have encouraged banks and building societies to resume lending to businesses and consumers, non-deposit taking lenders have been excluded and have received no Government support. It's important that the Government recognises the importance of specialist lenders in the mortgage market and provides the support needed to aid their return to new lending.

‘The Government has acknowledged the importance of the private rented sector and has said more needs to be done to encourage good existing landlords to grow their businesses, but the individuals and lenders that have stimulated the growth of the market so successfully over the past decade are being ignored.'