Arrears up at Bradford & Bingley

Some borrowers are finding it hard to repay their loans

Mortgage arrears are growing at one of the UK's biggest mortgage lenders, the Bradford & Bingley (B&B).

In a statement to investors ahead of its shareholders' AGM, the bank said some borrowers were finding it harder to repay their loans.

More than half of the bank's home loans have been made to buy-to-let landlords.

But the B&B said this area of business was holding up well, despite the recent downturn in property prices and the squeeze on the mortgage industry.

"Demand for buy-to-let remains robust, with landlords reporting continuing tenant demand and rising rents," the bank said.

"Arrears levels have continued to rise in the first quarter, reflecting increasing payment strain," it added.

The bank had previously revealed that at the end of last December its arrears of three months or more amounted to 1.85% of its mortgage loans.

Wider margins

With funds from other banks harder to come by, the B&B has had to ration its lending to new borrowers.

In common with other lenders it has been demanding larger deposits and raising its interest charges for new deals.

However the bank revealed that it was charging new borrowers more than it was having to pay to obtain fresh funds in the wholesale financial markets.

"We have repriced our mortgage products in recent weeks which has widened new business margins considerably, more than compensating for the higher cost of funds on these most recent loans," it said.

The bank recently denied rumours that it would have to raise more money by selling new shares to its investors.

Today it told them that it had a "strong capital base" and had still to draw down £2bn of extra funding that had previously been arranged.