As Bradford & Bingley teetered on the brink of nationalisation yesterday, property and mortgage market experts were divided over the impact its demise could have on the UK’s flailing housing market.

Richard Donnell, at Hometrack, the property information group, said slow mortgage lending and falling demand for mortgages were already huge problems that B&B was unlikely to exacerbate.

'B&B was not a major provider of owner-occupier mortgages, which is where the wider problems are,' he said.

The bank’s rescue comes as the number of houses sold last month fell to its lowest level since 1959. HM Revenue & Customs said 62,000 houses were sold in August, less than half the figure for a year ago.

Troy Martin, at Acadametrics, which compiles the FT house price index, agreed the direct impact would be limited, in part because the buy-to-let mortgage market targeted by B&B has largely evaporated amid wider gloom over falling house prices.

'The nationalisation of B&B is more of a symptom than a cause,' he said. 'The buy-to-let market has just gone away. If you have a property market falling by 25% from its peak, you would be very surprised if you weren’t getting nationalisation of lenders in fringe markets.”

But for Bradford & Bingley’s own buy-to-let borrowers the outlook could be bleak. Bradford & Bingley was the UK’s biggest provider of buy-to-let mortgages, and its exit from the market – hot on the heels of Paragon, another key lender – leaves the once-booming sector in disarray.

Financial Times