Low interest rates boost Paragon

28th Jul 2009 09:11

The dark days of the credit crunch are fading for buy-to-let lender Paragon, which said Tuesday that income for the April – June quarter was slightly ahead of expectations. The company said performance for the quarter – the third quarter in the company’s financial year – was similar to the second quarter, pushing the nine-month operating profit up to £30.2m, and pre-tax profit to £31.4m. The pre-tax profit figure includes an exceptional profit of £4.6m on the purchase of the group’s securitised bonds.Income was better than expected thanks to the low redemption rate, while costs were in line with management expectations.Charges for bad debts were lower than the average quarterly charge for the first half of the financial year as a result of the more stable arrears position and the success of the company’s new collections methodology.Free cash balances at the end of June had increased to £89.2m.Performance since the end of June has remained on a par with the April – June quarter“We expect UK interest rates to remain at the current low levels until at least the end of the calendar year, which will continue to have a positive impact on borrower payment performance,” the company said. “Whilst there have been some recent signs of improvement in the funding markets, we do not expect a significant reopening in the near future, hence we expect competition to remain subdued and mortgage redemption rates to remain low,” it added.