Specialist lender Paragon reported a first-half profit increase due to surging commercial and residential mortgage lending volumes, despite political and economic uncertainty.

The lender reported underlying profit of £79.8m in the six months to the end of March, rising 8.7 per cent when compared to the same period last year. Further to this, lending volumes grew by 30 per cent to £1.29bn, driven by its mortgage and commercial lending division, which was achieved despite maintaining cautious liquidity levels in the midst of Brexit-related market uncertainties.

While the UK housing market has stagnated over recent months, challenger banks such as Paragon, OneSavings Bank and Charter Court have all reported positive loan book growth in recent months.

According to Goodbody analyst John Cronin, the three lender’s positive results and Paragon’s strong outlook “reinforces the message these specialist lenders can continue to enjoy strong loan growth despite the relatively subdued macroeconomic backdrop”.

Furthermore, Paragon argued that professional landlords had been largely undeterred by Brexit-related uncertainty, which supports growth in the sector. This outlook contrasts that of Spicerhaart Corporate Sales managing director Mark Pilling, who noted that the private rented sector is already facing trouble, with recent regulatory changes and the consultation on legislation to abolish Section 21 “exacerbating” the problem.

However, Paragon chief executive Nigel Terrington said: “In buy-to-let, we have continued to grow lending adapting to the changing market dynamics.

“Professional landlords are becoming the backbone of the UK private rented sector, where we are well placed to address their complex needs.”

The lender’s net interest margin – the difference between what it earns from loans and pays for deposits – improved by 8 basis points to 2.24 per cent, while retail deposits rose 11 per cent to £5.9bn.

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