B&B defends buy-to-let boom

Mortgage bank Bradford & Bingley yesterday hit back at claims by Barclays that lenders were being reckless in enticing people into risky buy-to-let mortgages.

Directors at the former building society, Britain's biggest provider of loans to buy-to-let investors, said they were "surprised" to read Barclays chief executive Matt Barrett's comments because his bank had been a "big player" in that market through its Woolwich arm.

In recent months new landlords have continued to pile into the property market, with some building up large portfolios of rented properties, despite worries about falling prices in some areas.

On Thursday, Mr Barrett said Barclays had cut buy-to-let lending after deciding 18 months ago that it was "being overdone" and that there had been too much "speculation".

While Mr Barrett did not name names, his comments did bring a sharp response from B&B, which has a 20%-25% share of the buy-to-let market.

Announcing its results for the six months to June 30, the bank said total new lending during the period more than doubled to £4.6bn, half of which was buy to let.

Christopher Rodrigues, B&B chief executive, rattled off a succession of figures to counter suggestions that this was a risky business.

He said B&B's new buy-to-let customers borrowed an average of 75% of the value of a property, while young, first-time buyers often borrowed 95% or more. Mr Rodrigues said that the second category was more likely "to go bad on you".

Borrowers in the buy-to-let sector tended to have a "better credit performance" - typical customers were in their 40s and earned £60,000 a year. B&B said mortgage arrears and possessions had fallen. Of the 350,000 mortgages on its books, only 91 were in possession.

Since its flotation on the stock market in December 2000, B&B has reinvented itself as a specialist mortgage lender and independent financial adviser. It also operates one of Britain's largest estate agency networks.

It said half-year, pre-tax profits before exceptional items dipped to £132.4m from £135m during the same period last year.

Mr Rodrigues said sales of investment products "remain subdued". Income from the sale of products such as with-profits bonds fell 36% to £21.4m as a result of people "choosing not to invest at this time".

He added: "We are taking action to reduce our costs in response to continued weakness in the investment product market."

Estate agency revenues fell 16% in the period to £35.2m. B&B said: "Encouragingly, the market has picked up in recent weeks and we have entered the second half with stronger pipelines than in July 2002."

The bank cheered its 1.1m small shareholders by announcing an interim dividend of 5.5p, up 12%, which "reflects the confidence we have in the future of our business".