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The whole of the buy-to-let sector will see a ripple effect caused by Bradford & Bingley, a senior City analyst has warned.

Following the panic caused by Bradford & Bingley's announced losses and changed rights issue terms, shares in HBoS - the parent company of Halifax, the country's second largest buy-to-let lender - fell 10 per cent to 306p in response on Monday. They are now a third of their value compared with October last year.

Alliance & Leicester and Barclays also suffered, with shares falling by more than 2.5 per cent, while the combined value of Britain's six largest lenders fell £2.77bn, on what has been dubbed "black Monday".

Justin Urquhart Smith, managing director and co-founder Seven Investment Management, said: "They managed to destroy the very delicate confidence that was beginning to be achieved again in the banking sector in general."

According to the Council of Mortgage Lenders, industry-wide figures for three-month mortgage arrears in buy-to-let over the last quarter were 0.9 per cent of the total, up from 0.73 per cent at the end of 2007. However, Bradford & Bingley recorded 1.3 per cent buy-to-let arrears at the end of last year, which rose to 1.85 per cent by April.

A statement from the bank said: "The arrears performance of the organically originated loans, particularly buy-to-let, proved substantially better than the acquired mortgages.

"Arrears in the more recently acquired mortgages from Gmac-RFC have been higher than anticipated. We have already cut back our purchases from Gmac- RFC to the minimum commitment under our contract."