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In an interim management statement released last week, the former building society revealed while the number of its borrowers in arrears had started to creep up at the start of 2008 its funding facility was not as hard hit as recent press reports speculated.

At the start of April, Bradford & Bingley was downgraded by ratings agency Moody's after denying it would have to raise capital through a rights issue. In a statement, released on Tuesday, the lender confirmed it had yet to call upon its £2bn funding facility.

However Bradford & Bingley also confirmed its lending volumes and net interest margins were down in the first quarter of 2008 compared with the same time last year, but stressed demand for buy-to-let products remained robust.

Nickie Aiken, group head of PR for Bradford & Bingley, said: "The last thing any lender wants to do is repossess and we would rather work with our borrowers and look at ways we can help them.

"Hopefully the Bank of England announcement will start to create shift among lenders but we remain confident in the buy-to-let market.

"We have always said we are well funded through this year and we were able to complete securitisations before and after the credit crunch. We have a flexible business model and that can adapt to the changing market conditions. Demand for buy-to-let mortgages remains high with continuing tenant demand and rising rents."

A trading statement from the lender released on Tuesday said business levels had been lower in the first three months of 2008 due to a deliberate repricing in the mortgage range and introduction of stricter criteria to regulate business volumes.

The lender said it had also anticipated house prices would fall further in 2008 and had "significantly" increased its credit impairment provisions and significantly boosted its management focus on collections processes and treatment of arrears cases.

Damien Paterson, managing director of Glasgow-based IFA Paterson Financial Planning, said: "If borrowers had not been allowed to stretch themselves then arrears would not be such as issue. Three-and-a-half times income is enough.

"This time it is not unemployment that is causing the arrears, it is irresponsible lending and people should never have been given the chance to have five times their salary or 125 per cent loans. Of course the interest rate was going to go up and then the mortgage would not be affordable.

"I am not surprised there are issues in the market just now."