Specialist lender Paragon Group has reported record profits, thanks to a surge in the buy-to-let market.

Paragon reported underlying pre-tax profits of £122m for the year to September 30 – up 18% on the previous year.

Nigel Terrington, chief executive, said there was “ongoing demand” for rented property, with Paragon being “in the thick of it”.

Paragon, which closed its books to new lending during the credit crunch, has now launched a bank.

It also said it would embark on a £50m programme of buying back its own shares.