B&B suffers on loan losses
BRADFORD and Bingley will lose up to £700m on mortgage defaults this year and expects an increase in the rate of loan losses, its chief executive Richard Pym said yesterday.
Pym said the number of borrowers more than three months behind on their mortgage had grown from the 4.6 per cent figure it announced in March and was now higher than five per cent.
He added that the rate of deterioration was likely to increase, as more borrowers find themselves in financial difficulty amid the recession.
The lender is likely to add to the £20bn it has already borrowed from the government, as its private sector loans are maturing at a faster rate than it can recoup what it has loaned to homeowners.
B&B expects to redeem around £2bn of mortgages per year in the next three years, but will have to repay loans of up to £10bn this year alone, leaving the government to make up the shortfall.
The company already received interest-free loans of more than £18bn through the Financial Services Compensation Scheme.
But Pym said the taxpayer could eventually see a profit on the government’s investments once all of its mortgage loans have been redeemed and expressed optimism that the number of borrowers falling behind on payments was decreasing.
Pym is in charge of winding down B&B’s mortgage business after it was taken into public ownership at the height of the banking crisis last year.
B&B’s savings operations and high-street outlets were sold to Spanish banking group Santander, which said last week that it was ditching the B&B brand.