Paragon Bank said new buy-to-let loans jumped 25.1% to £812.2m in the first six months of the year compared to 12 months ago.

Its mortgage loan book was 4.5% higher at £13.7bn at the end of March, in a first-half trading statement, “with BTL comprising the overwhelming majority of the book”. 

The lender’s BTL pipeline came in at £662.2m, down from around £870m a year ago, but added that the new landlord origination system it launched during the period, “provides enhanced filtering on entry, so pipeline comparisons are not like-for-like”.  

It added that the new system means it is “able to decline inappropriate cases earlier in the process, reducing the size of the new lending pipeline at any given time”. 

The bank’s BTL arrears levels increased to 51 basis points from 38bps on 30 September, but this is lower than a year ago when the figure was 68bps. 

Impairment charges across all mortgage lending also fell to £5.1m from £8.7m 12 months ago. 

Paragon Bank Managing Director of Mortgages, Louisa Sedgwick (pictured) said: “A 25% increase in new lending shows the underlying strength of demand in the BTL market. 

“There remains an acute mismatch between supply and demand in the rental market and landlords are responding.” 

The business also offers a range of other small business, property development and motor loans. 

It said new commercial lending was down 3.7% to around £570m from a year ago, while its development finance pipeline ended the period 20.7% higher at around £810m. 

The firm reported a pre-tax profit up 26.7% to £140.1m from a year ago.

For the full year, the lender kept its mortgage lending guidance unchanged at between £1.6bn and £1.8bn. 

Paragon Banking Group chief executive Nigel Terringto said the business was “well placed to navigate the evolving external environment and remain optimistic about the remainder of the financial year and beyond.” 

The business also set aside £6.5m to handle potential motor commission claims.