Bradford & Bingley signs mortgage deal

Buy-to-let mortgage lender Bradford & Bingley (B&B) has signed a £750 million mortgage deal that should support it through the current banking crisis.

The bank has agreed a deal with GMAC-RFC to renegotiate terms of a 'mortgage forward sale agreement'.

The original deal saw B&B buy £1.75 billion worth of mortgage assets from GMAC-RFC. This has now been revised to £500 million of loans to be acquired in the final three months of 2008 and between £225 million and £250 million worth of assets to be taken in the first quarter of 2009.

A statement from the firms said: "Both businesses have agreed to revise the terms of this agreement to their mutual benefit."

B&B has been under increasing pressure of late during the current banking crisis – with rumours of the Financial Services Authority (FSA) sounding out competitors in a bid to secure a deal akin to the HBOS/Lloyds TSB merger.

Investors had lost confidence in the lender after the property downturn and credit crunch hit its buy-to-let heavy business model.

Investors were also critical of B&B following its bungled share issue earlier in the year as it tried to garner more capital from shareholders.

An initial share issue was shelved and repriced when a US private equity stepped in to buy a tranche of the firm. However, when the US backers turned away, the share issue had to be repackaged for a third time.

In the end there was only 28 per cent take-up of the shares, leaving B&B's underwriters holding a 20 per cent stake in the firm.

B&B also came under pressure yesterday when ratings agency Fitch downgraded its credit rating.