Bradford & Bingley have just fallen out of the FTSE100 in the last quarterly re-jig of the top one hundred value companies in the country. But a strong performing buy-to-let housing market has put the specialist mortgage bank on course for good profits. These will be at the high end of City expectations.
The former building society has had a good start to the year, with strong growth. It is looking forward to a good second half of 2007 as strong demand continues to drive the market for buy-to-lets.
Compared with the first half of 2006, figures suggest that net lending is set to double for the first half of 2007. B&B’s profits were forecast to be between £358 and £377m in 2007, compared with £336 last year. That is looking for a 12% increase in profits, which is much in line with reports from other specialist lenders recently.
B&B has noted a slowdown in the housing market – inevitable following four rate rises since last August – but its activity in the buy-to-let market has allowed it to keep ahead of the competition.
B&B see that the fundamentals of the market are still strong. In the first half of the year the buy-to-let market has remained buoyant, and B&B believe it will continue to outperform the main market during the rest of the year. The high price of houses has meant that people have been driven towards renting a home, and the continuing influx of workers from abroad also keeps the buy-to-let market robust.
B&B reported that the number of people in arrears on their mortgage has risen slightly, as a result of the rising interest rates, but has no reason to believe that write-offs will be any more than in 2006.
In 2006 there was more than £100bn lent on buy-to-lets as the market grew by 57%. Of all mortgage lending buy-to-lets account for 11%, and some people say it adds to the problem of increasing house prices for first-time buyers.
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