"Our times this morning had improved, but set-up changes at the midday service went the wrong way which was reflected in our stage times," said Paddon.
Speaking to World Rally Radio, Paddon said: "My confidence with the car and snow is building, but we're still working on the best set-up.
"With the amount we have already learnt this weekend, we know what areas of the set-up that we need to work on so that I can get more confidence to push. It's encouraging to have moved up to fourth in the SWRC field and we've just got to bring it home to the finish now."
Tonight's timetable sees Paddon and Kennard contest six further stages, another set of three stages repeated morning and afternoon, including two runs on the 15km Hagfors power stage on the outskirts of town.
Paddon now holds 23rd position overall. In SWRC - Paddon's main focus - Proton driver Swede PG Andersson has a lead of 2:58.8 over the UK's Craig Breen in a Ford Fiesta. Another Swede, Pontus Tidemand, holds third in a similar Skoda Fabia S2000 to Paddon's.