Bradford & Bingley (B&B) is the latest lending company to get caught up in the credit crunch. B&B’s share price collapsed earlier this week after it issued a profits warning while simultaneously asking investors for an extra £300 million in funding.
The root of B&B’s woes lies in the scandal of “buy-to-let” mortgages. B&B is Britain’s biggest buy-to-let lender, doling out mortgages to wannabe private landlords eager to cash in on spiralling rents and house prices.
But now the boom has turned into bust and many buy-to-let landlords are falling behind in their payments. This has sparked fears of a panic sell-off of these properties that could trigger a crash in the market.
For decades successive governments have abandoned housing policy to the chaos of the free market rather than aiming to ensure that everyone had decent affordable accommodation.
Now the banks are in trouble and are begging for public funds to guarantee their deposits. But such panic measures just underline the fact that the government should be standing up to the City, not propping it up.