The investment house believed B&B had significant problems with near-term funding and structural issues, with potential over-exposure in buy-to-let (BTL) and self-certification sectors and a large percentage of clients on standard variable rates (SVR).
Its research note, ‘Bradford & Bingley Misunderstood: Risk Profile and Revenue Risks’, said: “How has B&B managed to retain its SVR book for so long, given that SVR has been in sharp decline at other banks and in the UK mortgage market more generally? While there is no instantly obvious answer to this question, it could be that the average B&B BTL customer is less experienced and indeed less professional than other lenders’ client base. We believe it will soon not be possible for people to simply sit on their SVR mortgages if rental yields are meeting mortgage costs.”
Katherine Conway, head of investor relations at B&B, said the lender did not comment on analyst research but insisted it was confident going forward.
“We are seeing good levels of BTL business and our pipeline is also strong. Lots of people are still wanting to be landlords and, in turn, people still want to rent. Yes there is a proportion on SVR, but that has always been the case.”
Linda Will, managing director at Accord Mortgages, commented: “The way that some lenders have been pushing into the market with lower rates and enhanced criteria has meant a lot of people haven’t been making money for a while. Investors will be adopting a different attitude to risk so these lenders will have to be more conservative to attract funding.”
