Arrears soar as B&B writes down £507m of bad debt

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by Gill Montia

Bradford & Bingley (B&B) has written down £507.7 million in mortgage debt for 2008.

The buy-to-let lender said the provision against bad debt and further falls in house prices compares with a figure of £22.5 million put aside in 2007.

B&B was taken into public ownership in September of last year in a move which also saw the sale of its deposits business and branch network to Abbey.

The lending side of the business is now in the process of being wound down.

However, the proportion of B&B’s £41 billion mortgage book in arrears of three months or more or in possession, has soared.

At the end of last year it equated to 4.60% of loans, compared with 2.48% in the first six months of 2008.

Meanwhile, the total value of arrears stood at 0.27% of mortgage balances at the end of last year, compared with 0.16% in the first half.

Actual losses on properties sold following repossession totalled £65.5 million in 2008, up from £23.8 million in 2007.

B&B says it expects the prevailing economic environment to result in a further deterioration in arrears during 2009.

The lender has around 300,000 mortgage customers and has pledged not to take possession of an owner-occupied property for a full six months after the customer first falls behind with their repayments.

Where a buy-to-let landlord is in arrears, the group says it will endeavour to protect any tenants by instructing a LPA receiver to collect rent directly from the tenant.