Optimism picking up after ‘disruptive’ Budget, says Paragon chief
Optimism in the UK is beginning to pick up, the boss of FTSE 250 lender Paragon has said, after sentiment was dampened by rampant tax speculation in the second half of 2025.
Nigel Terrington, the boss of Paragon bank, told Morning Wire that despite it being the early days of 2026, the mood was beginning to lift.
“Obviously we’re only in January but I would say it feels more optimistic”, he said.
It comes as Paragon gave markets a brief snapshot of its first quarter of the financial year, with commercial lending giving the bank a major boost.
In the three months to 31 December 2025, Paragon recorded a 6.9 per cent jump in total lending to £724m. This was fuelled by the commercial lending growing 17.6 per cent to just shy of £300m.
“We have a diversification strategy, we’re looking to grow our commercial division,” Terrington said.
“Last year, it was a relatively subdued market for all manner of reasons”
He noted a particular uptick in mortgages after a “difficult last year”.
“Sentiment around the housing market was weak; sentiment around the budget was disruptive about whether there’s going to be any any tax changes coming through – that’s kind of behind us now.”
Tax fears hit housing market
Businesses across the board reported subdued demand in the latter half of 2025 as speculation around taxes flared up with debate on how large a hole in public finances Chancellor Rachel Reeves would have to fill.
London was particularly hit by this with house prices in the inner capital plummeting at their fastest pace since the global financial crisis in November.
The largest fall was recorded in Kensington and Chelsea, according to data published by the Office of National Statistics, which plunged 16.3 per cent to an average of £1.19m. It came ahead of Reeves introducing a new high-value council tax surcharge for owners of properties valued at over £2m in the Autumn Budget, which is set to take effect in April 2028.
One policy floated in the Treasury’s rogue briefing bonanza was to hit landlords with a national insurance levy. The Chancellor was reported to be examining proposals that would scrap the exemption on earnings from property, pensions and savings from NI contributions.
Paragon’s pipeline for buy-to-let lending – a specialised loan for purchasing property specifically to rent out to tenants, not to live in – was a touch higher in the quarter at 0.4 per cent to £425m. The bank’s pipeline for buy-to-let ended the quarter 4.4 per cent higher year-on-year at £692m.
The mid-sized lender is part of a host of British banks awaiting the Financial Conduct Authority’s motor finance redress scheme.
The bank hiked its provisions to £26m, from £7m previously, for the car mis-selling scandal during its 2025 full-year results joining a batch of City giants which were forced to increase their funds following further updates on the watchdog’s redress.
The FCA wrapped up its consultation, which was pushed back a month, on 12 December with a full outline of the redress scheme expected for early 2026.
Terrington said: “I think people might regard the current proposals as a radical compromise because at one point some of the figures that were being thrown around were huge – like £40bn.”
“I think many might argue that the FCA is trying to deliver a result that is kind of balanced here in many ways… kind of like the art of the negotiation.”