B writes off £500m loans

More than £500 million in mortgage loans turned sour are being written off by nationalised lender Bradford & Bingley (B&B), the firm has said.

To reflect estimated arrears at the end of 2008 and the impact of further house price falls in the future, B&B is taking the charge of £507.7 million.

The hit compares with a £22.5 million provision for the previous year. Nearly 5% of its £41 billion mortgage book was three months or more in arrears, or repossessed, the firm said.

Last September, the group's savings business was sold to Abbey at the height of the financial meltdown and its mortgage book and other loans were taken on by the taxpayer.

Including the £612 million sale of the savings arm to Abbey and Treasury aid, B&B actually turned a profit of £134 million in 2008, but the lender said this was thanks to public support.

"In the prevailing economic environment, further deterioration in the arrears rate should be expected in 2009 and 2010," the lender said.

To repay Treasury funds pumped into the stricken firm, B&B's lending business will be wound down over the next 10 years under the nationalisation.

As a result the firm, which employed nearly 1,000 full and part-time staff last year, will make job redundancies.

Its annual report said: "Bradford & Bingley has for some time been one of the largest employers in the Aire Valley.

"Bradford & Bingley is working with Yorkshire Forward and Bradford City Council to ensure that any negative community impact is minimised."

New lending at B&B will cease under the plans and incentives will be offered to existing customers to move their mortgages elsewhere through measures such as waiving early redemption fees.

It hopes to cut its mortgage book to £36.3 billion by the end of 2011 - as well as selling commercial loans and its portfolio of Treasury investments.