Immigration Increasing Strain on UK Rental Market

The chief executive of Paragon Banking Group has expressed concerns over the insufficient number of landlords in the UK to meet the needs of a growing population, particularly in student communities and areas experiencing increased immigration.

Nigel Terrington stated that the rising demand for rental homes is driving up costs, highlighting that immigration is adding further strain to the rental market.

He noted, “The situation could worsen as the UK population is projected to increase by four million people by 2032, mainly due to immigration. Newcomers typically prefer to rent rather than purchase properties in the UK.”

Terrington emphasized, “This elevates pressure on the rental market and indicates a need for greater development of landlord opportunities rather than just maintaining current levels.”

Despite concerns about potential declines in landlords due to forthcoming legislation favoring tenants, Paragon has expanded its buy-to-let mortgage lending.

The lender, which is part of the FTSE 250, reported a substantial 25.1% increase in the total value of new loans to landlords, rising from £649.3 million to £812.2 million.

For the six months ending March 31, the bank revealed a 26.7% increase in statutory profit before tax, climbing from £110.6 million to £140.1 million, even after allocating £6.5 million for potential compensation to customers in its motor finance division.

Paragon is well-established in the buy-to-let sector and is focused on expanding its market presence through the introduction of a new broker platform to attract more mortgage clients.

The UK government is evaluating the Renters’ Rights Bill, which aims to implement several reforms, including the abolishment of no-fault evictions. The upcoming legislation, which is currently under discussion in parliament, is also intended to aid tenants in disputing rent increases and will restrict landlords from demanding advance rent payments exceeding one month.

In its interim financial report, Paragon stated: “We continue to collaborate with the UK government and relevant parliamentarians to influence the development and enactment of the Renters’ Rights Bill and other issues affecting the private rental sector, both directly and through industry organizations.”

Additionally, Paragon announced plans to repurchase another £50 million of its shares, following its initial buyback program of the same value.

Analysts at Peel Hunt remarked that the bank’s shares have shown consistent performance, rising nearly 30% this year. They noted that operating expenses have seen a slight decrease, as lower employment costs offset increases in other areas, positioning Paragon favorably moving forward.

On Wednesday, Paragon’s shares ended the day up by 6.5p, or 0.7%, closing at 909p.