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Buy to let lender Paragon Mortgages is about to test how markets react to fears about toxic mortgage debt by issuing £250 million in bonds.
The lender had to stop mortgage lending when funding for securitisation of mortgage loans dried up in the credit crunch – but the firm feels banks may now be ready to offer funds, especially after Santander recently sold £3.75 billion of bonds.
The move was divulged by chief executive Nigel Terrington as the company revealed soaring profits for the six months ending March 31 – up 35% to a pre-tax £39.5 million.
The specialist buy to let lender was also encouraged by falling arrears and announced millions in loans to landlords.
“The performance of the buy-to-let portfolio continues to be exemplary, with strong customer retention and low arrears levels combining to deliver excellent revenues and profits for the period,” said director of mortgages John Heron.
“Arrears across Paragon’s £8.2 billion of buy-to-let loan assets continues to fall and at 0.75%, including Receiver of Rent cases, is outperforming both market peers and the wider mortgage sector.”
Highlights of Paragon’s half-year report included:
• Pre-tax profits of £39.5 million up from £29.3 million for the first three months of 2010
• Arrears down to 0.75% from 1.17% compared with the first quarter of last year
• £50.2 million loans advanced to landlords since September, with £94.7million in the pipeline
Paragon lends through two brands – the main Paragon Mortgages business and Mortgage Trust, which has recently announced a return to lending.
Besides buy to let lending, Paragon also considers funding houses in multiple occupation (HMOs), loans to companies and financing for blocks of flats.
The company is also looking at offering wider services to other mortgage lenders as a source of extra income.
“In addition to developing our new lending proposition, we have been building the loan portfolio acquisition and third party servicing arms of our business. We feel this is a growth area and with an estimated £250 billion in unwanted loan assets up for sale by UK banks there are opportunities in the marketplace,” said Heron
For a copy of the full half-year results, visit www.paragon-group.co.uk.
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