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Buy to let downturn hit Bradford and Bingley, expert states

Mon, 29 Sep 2008

Failed bank Bradford and Bingley (B&B) was hit by a downturn in the buy to let mortgage market, according to one expert.

Writing for the Guardian, Simon Bowers explains the institution had positioned itself as the largest lender of such mortgages and so has been disproportionately hit by the credit crunch .

Falling house prices left new buy to let customers looking "vulnerable", especially as they often take on large amounts of debt, he points out.

"Last month B&B said the number of its loans that had slipped more than three months into arrears had increased by 55 per cent in the previous six months. Repossessions were up 27 per cent," Mr Bowers says.

This is double other mortgage lenders and City analysts estimated almost half of B&B's loans could be in negative equity if house prices fall by a third, he adds.

Although the bank was not facing the same kind of pressures as Northern Rock did, it appears savers lost confidence and started to withdraw money, so the decision was taken to nationalise a second British bank, Mr Bowers states.

Meanwhile, research by Intermediary Mortgage Lenders' Association shows 68 per cent of brokers have been unable to find a deal for their clients in the last two months.
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