Its commercial lending lifted 2.8% to £589.8m in the half year to the end of March, “with growth in SME and structured lending offset by lower flows in both the motor finance and development finance operations”.  

But the lender said these advances coupled with “strong customer retention” led to 4% year-on-year growth in its mortgage loan book to £13.1bn over the period   

It added that application flows have been stronger in recent months, recovering from last autumn.  

The business said: “The group has performed robustly in the higher interest rate environment of the last six months, seeing positive levels of demand from its specialist lending customers and continued strong inflows of retail deposits.   

“Pipelines for both the BTL mortgage and development finance businesses have grown from their September 2023 positions, improving the near-term outlook for lending volumes.”  

The bank posted an underlying profit up 13.5% to £146.3m for its first six months.  

It also lifted mortgage lending guidance for the full year to between £1.4bn and £1.6bn from between £1.3bn and £1.6bn.  

Paragon chief executive Nigel Terrington said: “There has been a strong recovery in customer demand with new business pipelines materially above the levels seen at the year-end, improving the outlook for lending volumes for the rest of this year.”   

Paragon Bank managing director of mortgages Richard Rowntree (pictured) added: “As anticipated and forecasted, new BTL lending fell during the period, reflecting the wider housing sector, but we have built our new business pipeline back to the levels we saw at the same point in 2023.   

“We’re also seeing renewed levels of confidence among landlords, particularly those portfolio landlords with four or more properties.”