Buy-to-let lender reports continued rise in mortgage arrears

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by Gill Montia

Buy-to-let lender, Bradford & Bingley (B&B), has reported that one in 20 of its mortgage borrowers are in arrears.

B&B’s £41 billion mortgage book was taken into public ownership in September of last year.

Its deposits business and branch network were at the same time sold to Abbey and the lending side of the business is now in the process of being wound down.

In 2008, B&B wrote down £507.7 million in bad mortgage debt compared with £22.5 million a year earlier.

At the end of last year, the proportion of the lenders’ mortgages three months or more in arrears stood at 4.6%, compared to 2.48% during the first six months of the year.

The firm’s chairman, Richard Pym, has now warned that the proportion of borrowers defaulting on their payments has increased to above 5% and that during 2009, bad debt could cost the firm between £600 million and £700 million.

He expects the arrears rate to continue to rise during the remainder of this year, as B&B’s buy-to-let and self-certified borrowers come under pressure in the recession.