UK lender Bradford & Bingley said demand for buy-to-let mortgages remained strong but arrears continued to rise in the first quarter, with falling house prices expected to drive up bad-debt provisions in 2008.
Britain's biggest provider of buy-to-let mortgages said it had seen "excellent growth" in its retail deposit base. It said lending volumes in the first quarter were lower than last year as the specialist lender repriced its mortgages to regulate volumes and widen new business margins.
"To enhance business quality, we have increased minimum credit requirements and selectively lowered maximum loan-to-value levels," the bank said. "As a result, the new business pipeline is below the same period last year, but in line with our plan for 2008."
Arrears, however, rose in the quarter and B&B said it expected increased payment strain, combined with falling house prices, to result in higher impairment provisions in 2008.
B&B, Britain's ninth biggest listed bank, said it remained funded into 2009, despite ongoing difficulties in the wholesale markets, with £2 billion of committed funding facilities currently undrawn.
The bank was forced earlier this month to deny it was intending to raise cash through a rights issue, rejecting a report it was looking to strengthen its balance sheet.