Paragon upbeat about buy-to-let

Buy-to-let mortgages specialist Paragon yesterday said the sector's future prospects were bright - despite concerns in some quarters about a possible housing market downturn and worries about rising personal debt levels.

The company said the market for buy-to-let mortgages had remained buoyant throughout much of the year. Paragon believes prospects in the long-term "remain excellent", since many potential first-time buyers cannot afford to step on to the property ladder.

The Paragon Group yesterday reported a 13% rise in full-year pre-tax profits to £51.9m. In June it bought insurer Britannic's mortgage lending arm Britannic Money for £18.8m, and yesterday the company said this business - renamed Mortgage Trust - was already trading profitably.

But this has come at a price, with about 160 jobs at Mortgage Trust likely to be axed. When Paragon bought the business it had 250 staff.

In recent months new landlords have continued to pile into the property market, with some building up large portfolios of rented properties, despite worries about the state of the market.

Research has suggested that in recent months investment landlords have been, at the peak, the buyers of one in eight of every home sold.

This suggests some first time buyers are being squeezed out of the market by buy-to-let investors.

In August, Barclays said it had cut buy-to-let lending after deciding it was "being overdone" and there had been too much "speculation".

Jonathan Perry, Paragon's chairman, said housing market data indicated increasing tenant demand. Many potential first-time buyers were staying in rented accommodation for longer periods of time, while pressure was also building as a result of council tenants exercising the right to buy.

"The combined business provides a strong base for further development in a sector which has excellent long-term growth prospects," said Mr Perry.