Bradford & Bingley figures suggest all is not well in the buy-to-let mortgage market

03 June 2008 / by Rebecca Sargent
Not only has Bradford & Bingley stirred up its shareholders, it has also sparked potential panic in the buy-to let mortgage market and housing market as a whole with its disappointing trading figures for the first four months of 2008.

In its latest trading update, Bradford & Bingley announced a loss of £8million between January and April 2008 due to "the recent worsening of economic conditions".

Worryingly, a large part of this loss is a result of mortgage arrears, which, according to Bradford & Bingley have seen a sharp increase in the first four months of 2008. The figures show that the number of borrowers who have missed three or more monthly payments shot up by 36 per cent in this period.

As a result of a rise in arrears, experts are predicting that Bradford & Bingley will soon be forced to raise its buy-to-let mortgage rates. If these analysts are correct, the move would come in the wake of Nationwide, which today announced an interest rate rise of up to 0.3 per cent on its fixed-rate mortgages and could force other lenders to follow suit.

Couple rising rates with the current mortgage lending statistics and, according to experts, the UK housing market looks set for a downturn that could rival the housing crash of the 1990s.

The buy-to-let mortgage arrears data from Bradford & Bingley supports previous figures from the Council of Mortgage Lenders (CML) which also showed an increase in arrears of more than three months - although the CML is keen to emphasise there has only been a slight rise so far.

Director general at CML, Michael Coogan, said: "The market is still very uncertain, but lenders are working hard to ensure that arrears and repossessions are minimised, and that pricing is as attractive as they can make it in a market where they must manage the demand for lending with caution."

However, as the number of buy-to-let mortgages has risen from 120,000 in 2000 to 1.1 million, the Bradford & Bingley mortgage arrears figures could have a huge impact on the UK's housing market. As house prices fall at record rates and mortgage rates rise, experts fear that landlords may decide on a panic property sell-off which could potentially destroy the UK property market.

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