Buy-to-let mortgage lender Paragon said today it expected staff numbers to reduce by a third as it faces up to lower levels of new business.
With funding sources for lending limited, Solihull-based Paragon said advances were likely to be 50 per cent lower in the six months to the end of March.
The group employed an average of 763 people last year, but said today that the figure was likely to be come down by 30 per cent by the start of September. It said it retained the capacity to resume lending at higher volumes when market conditions allowed.
Paragon, which recently required a £285 million rights issue to ward off a funding crisis, said redundancy costs and the impact of raising the new funds would result in lower pre-tax profits in the six months to March 31.
However, it said today that operating profits were in line with management expectations.
Paragon stressed that the performance of its buy-to-let lending book remained "exemplary" with arrears at similarly low levels to recent years.
It also said recent data from the Royal Institution for Chartered Surveyors showed continued high levels of tenant demand and strong rental growth.
Paragon added in a trading update: "Whilst sentiment in the housing market has deteriorated in recent months, the private rented sector remains strong."
Paragon's main financing facility stopped advancing funds from the end of February, putting pressure on its ability to carry out new lending.
The company's funding model has been largely reliant on wholesale money markets, which have dried up since the summer's credit crunch.
It was forced to turn to shareholders for new cash as a £280 million corporate lending facility had been due for repayment.
Paragon said today: "The credit environment remains difficult, impacting the workings of the money, banking and capital markets. We continue to expect a return to market stability and to more normal lending activity by the group in due course.
"In the meantime, the board will continue to apply its prudent management approach to the servicing of its loans and to the identification of funding sources for future loan originations."Reuse content