Mortgage arrears mount for buy-to-let lender

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by Gill Montia

Bradford & Bingley (B&B), the buy-to-let mortgage specialist, has had one of its credit-ratings downgraded by Moody’s.

The lender’s “bank financial strength rating” (BFSR) has been downgraded from C+ to C, following a sharp rise in the number of customers falling behind with repayments.

Moody’s describes the BFSR as “a measure of the likelihood that a bank will require assistance from third parties such as its owners, its industry group or official institutions”.

The credit rating agency has suggested that further cuts could come which could potentially mean that the bank will require support from the Bank of England.

The latest regulatory filings made by B&B’s wholesale funding instruments indicate that customer arrears have risen by between 40% and 50% since the end of last year.

While the figure remains low, at just over 2% of the lenders total mortgage book, analysts have expressed concern at the rate of increase among defaulters.

Meanwhile, B&B has confirmed that it is fully funded until the first quarter of 2009.

The lender also attracted an additional £1.3 billion of savers’ money in the first two months of 2008.