Dear taxpayer. Congratulations. You are now the proud owner of £50 billion of mortgages and personal loans, an unprepossessing office block in Bingley and a swish new headquarters on the outskirts of Bradford.

You are already big in the mortgage business thanks to the acquisition of Northern Rock. But in this case you will not be holding on to the branches, which are being sold to Abbey National’s owner, Santander, for about £400 million.

Paying £21 billion for the mortgages looks like a bargain. The snag is that some of those mortgages were granted to people who cannot or will not pay them back. If enough of those borrowers decide to give up and hand back the house keys to the Government, taxpayers may be out of pocket. But, if it makes you feel any better, the losses will be shared with Britain’s biggest banks and insurance companies.

Bradford & Bingley was a leading provider of so-called self-certified mortgages, loans designed for the self-employed and other people who could not provide records of their earnings. These loans are turning bad at an alarming rate. However, they account for only 17 per cent of its mortgages. Almost half of B&B’s loans were to buy-to-let landlords yet, despite all the adverse publicity, these are not performing much worse than ordinary mortgages.

According to the Council of Mortgage Lenders, 1.1 per cent of buy-to-let mortgages were three months in arrears at the end of June, compared with 1.3 per cent for the market as a whole.

The reason that investors are so nervous about buy-to-let mortgages is that they did not really exist in the last property downturn in the early 1990s, so nobody really knows what to expect as house prices fall. Until recently rents have held up pretty well, meaning that buy-to-let landlords have had no reason to panic, despite the falling value of their assets. But rents have recently started to soften and the worry is that overborrowed landlords will get into difficulties and default on their mortgages. Given the lack of previous experience with buy-to-let mortgages, stock market investors have been assuming the worst.

The credit rating agencies, which are trying to be as gloomy as possible these days, have been estimating that B&B’s new owners could get back about £1 billion less than it owes. However, the Government has come up with an arrangement that minimises the possible losses borne by the taxpayer.

Some of the losses will be met by the banks and other financial institutions that contribute to the Financial Services Compensation Scheme. The Government has lent the scheme £14 billion, which will be paid back from the interest and repayments of the B&B mortgages.

For the first three years the banks and insurance companies will be asked only for the interest on the £14 billion, which should run at about £900 million a year. If everything goes well, the banks could hope to recoup even some of the interest payments. But this is thought to be unlikely.

The best guess is that there will be losses ultimately of up to £1 billion shared between the Government and the industry. Hardly good news. But a tiny fraction of the likely bill for government bailouts in the rest of the world.