Paragon Bank lending volumes fall as Covid lockdowns stall house sales
Specialist lender Paragon Bank reported a fall in first quarter lending volumes as Covid-19 lockdowns stalled house sales, but said it expected a pickup as buyers rushed to complete purchases ahead of the end of the stamp duty holiday in March.
The bank on Fridays said buy-to-let volume fell £110.8m to £298.7m year on year, largely reflecting lagged impacts of the first lockdown and “market wide challenges facing the execution of housing transactions”.
Total advances during the three months to December 31 fell to £521.8m, made up of £304.1m in mortgage loans and £217.7m in commercial advances, down from £684.9m last year.
Net loan balances grew to £12.67bn at the end of the period.
The buy-to-let pipeline at the end of the quarter stood at £966.8m, up £152.8m. Paragon said it expected this to convert at a faster rate in the second quarter as the government’s stamp duty holiday ends on March 31.
Redemptions fell 21.5% to £169.2m. Commercial lending volumes remained strong at £217.7m with growth being led by development finance, where advances in the first quarter are ahead of 2020.
Lending to small and medium-sized businesses grew quarter on quarter and was lifted by a further £13.6m of loans as part of government-backed coronavirus relief schemes, but was still below the levels seen pre-Covid-19.
Payment holidays have been given on approximately £2.6bn of balances since last March. By the end of 2020 the remaining balance stood at £104.6m, of which £93.4m represented extensions due to mature over the coming few months.
Chief executive Nigel Terrington said: “We have made an encouraging start to the year. Good momentum in new business flows has led to strong growth in the pipelines, particularly for buy-to-let and development finance.”
“Notwithstanding the economic environment, the group's loan portfolios have continued to demonstrate the quality of our underwriting with low levels of arrears. With strong capital ratios and high levels of liquidity, we are well positioned to face the challenges and opportunities ahead.”