The persistent shortage of housing in the UK will continue to underpin prices and rents in an “incredibly resilient” market, the boss of specialist mortgage lender Paragon Banking Group said today.
Chief executive Nigel Terrington said the market continues to ride out “all the stresses and strains” thrown at it over recent years with arrears rates remaining at historically low levels.
He said that while smaller “amateur” landlords with only one or two properties to rent were struggling with more onerous levels of regulation, the larger professional players with four or more properties continue to thrive.
In its business review of the first half of the year Paragon said: “The experience of these specialist landlords, their level of involvement with their lettings business and the diversification of their income streams across properties make them less vulnerable to cash flow shocks in the event of a downturn and better able to cope when faced with an adverse economic situation impacting them or their tenants.
Mortgage lending was up by 25.1% to £800.9 million in the six months to end March.
Pre-tax profit was up 26.7% at £140.1 million from £110.6 million previously.
The net interest margin was 3.13% in the first half, down from 3.19% a year ago and above the 'around 300 basis points' guided to for the full year.
Terrington said Paragon’s "robust" capital position has enabled the firm to increase its share buy-back programme to up to £100 million for the full year, up to £50 million before.
Russ Mould, investment director at brokers AJ Bell said: “ A strong set of first-half results, raised profit guidance for the full financial year to September and increases in both the dividend and the share buyback programme all highlight the potential virtues of Paragon Banking’s business model.
“ Those looking for vices will note an increase in loan impairments and a provision for car financing commissions, but both are modest, and the shares’ biggest challenge may, for the moment, be the valuation, as only NatWest trades on a higher multiple of historic net asset value among the listed banks.
