The protracted global credit crunch claimed a new British victim today, as mortgage lender Paragon warned it may need to raise funds from shareholders, sending its stock down as much as 50%.
The warning sent fresh shock waves through Britain's already battered banking industry, with shares in Northern Rock suffering one of their biggest falls since it was forced to seek emergency funding from the Bank of England in September.
Bradford & Bingley, Britain's biggest buy-to-let mortgage lender, added to jitters by saying it had sold loan books comprising over £4 billion sterling of assets to increase its liquidity.
Global credit markets seized up in August, as banks cut back on lending as they tried to assess their own, and each others', losses on poor quality US mortgage loans.
Most Irish and British lenders, including Northern Rock and Paragon, do not have much exposure to the so-called US sub-prime mortgage market, but have been hit by the drop in lending.
Hopes of a swift return to normality have faded in recent weeks, as the world's biggest banks have announced more than $50 billion of losses and asset write-downs.
Paragon, Britain's third-biggest provider of mortgages for people who rent out properties, said the drop in lending meant that it had not been able to renew a £280m loan facility on acceptable terms.
As a result, it had entered into an agreement with UBS which would allow Paragon up to the end of February to raise money from its shareholders, underwritten by the Swiss bank, if it remained unable to renew its loan facility.
