LondonCalling:Buy-to-let borrowers are traditionally lenders' best customers - but they're an easy target to go after in the credit crunch, says Angela Pertusini

SO, IT'S not bad enough that we have to sit there waiting for the Bank of England to tighten the thumbscrews and raise interest rates in order for our lenders to do the same. Now, the lenders themselves have decided to act unilaterally and some are sticking up interest rates on products with no cue from bank governor Mervyn King. And their favourite product to target? Buy-to-let mortgages.

If the banks are nervous and having to increase their incomes then buy-to-let customers are not going to generate the sob stories that other borrowers might.

A giant pull quote from a red-eyed investor saying: "It's awful, my rental income barely covers the mortgage outgoings these days - thank God the whole lot is tax deductable," doesn't pull on too many heartstrings as the banks have cannily calculated.

It does seem a bit unfair to target the buy-to-letters though as they, traditionally, have an extremely low default rate. It's like punishing well-behaved children with pre-emptive clips round the ears: "Well, we have to keep the beating quota up somehow and the really dreadful brats wouldn't sit still long enough."

But, while only a handful of banks have made the move so far, the feeling is that others will not be far behind. Worryingly, three of them that did raise rates included the beleaguered Northern Rock as well as the Alliance & Leicester and the Bradford and Bingley which were teetering on the brink of similar catastrophes before the whole system was saved by Mervyn King's guarantees.

Michael Bolton, the chief executive of Edeus, a large online specialist in buy-to-let and another lender that has raised its rates by 0.65 per cent on average said: "I've been in the mortgage market since 1989 and I've never seen anything like this."

Should the date 1989 be ringing any warning bells? It was, after all, the beginning of the end for the 1980s boom but, aaah, things are so different now we comfort ourselves.

Unemployment is low; interest rates are still comparatively low; and the whole market is so diversified now. But, affordability has never been worse (even at the height of the 1980s boom, a couple on an average income had a chance of buying in London, not any more without major help from parents or legacies), personal debt has never been higher and interest rates are likely to rise again.

What with the return of shoulder pads and Joan Collins hairdos on the catwalks, is the fashion industry sending subliminal messages?

I can't decide whether to panic or not. Instinct tells me that prices should have stopped growing about eight years ago to bear any relation to wages but that didn't stop the rises. And a quick clippings trawl shows that we have been here before even during the boom: 2005 was a sluggish year in London; in 2004, people were predicting a crash after prices fell a couple of points two months running; 9/11 was meant to bring about the end (and then 7/7).

Everyone is speculating about whether the banking crisis of the past week will force rates up or down (or whether the Bank of England's promise to guarantee deposits will lead to some sort of run on sterling) but, for me, a tiny rate cut won't cut that much ice. The big crunch time will be the leaks on City bonuses in a couple of months' time.

If you are waiting to snap up some bargains in London among the current confusion, you would do well to keep your eyes on the second-hand market as the premium paid for new-build (together with the often sub-prime locations new-build is often being squeezed into) is increasingly being held up to scrutiny.

When markets were rising in the double digits each year, not many surveyors were going to question a few thousand extra paid for a gleamy kitchen and swanky en suite. Now they are.

The Royal Institution of Chartered Surveyors (RICS) reports that banks are asking for more than one valuation on new-build - apartments especially - when they feel that the launch prices may be, ahem, optimistic.

With little confidence in capital growth between launch and completion, new-build is looking decidedly risky to conservative lenders.

Someone whom has a keen interest in these premiums is developer Marcus Cooper. You may remember that I wrote a few weeks ago about his purchase of Witanhurst, the largest residence in London after Buckingham Palace.

He bought the run-down Highgate mansion for £32 million (€45.5 million) and made a lot of pronouncements about how he would restore it to a point beyond luxury and remarket it at £150 million (€214 million) when work was completed.

Obviously he has thought better of his plans and has put it straight back for sale without any work carried out at a cheeky £75 million (€107 million).

Apparently, despite lying empty for years, there is now too much interest for Mr Cooper to resist the lure of flipping it.