Back in 2007 Bradford & Bingley issued a dossier challenging the "myths" and "misperceptions" held by critics of buy-to-let lending. It wanted to "celebrate the resounding success" of the hundreds of thousands of people "investing for their futures" through the buy-to-let market.

Myth 1 in the dossier was how "the buy-to-let market is a bubble waiting to burst". What nonsense, it said. Demand would remain strong, investors would ride out any cyclical movements in house prices, and it would be "extremely difficult for a widespread, national over-supply to develop."

Little more than 24 months later, B&B has reported an extraordinary 20-fold increase in bad debts, rising from £22.5m in 2007 to £508m in 2008. The number of its mortgages three months or more in arrears trebled to 4.6% of its book in the last quarter of last year compared to 1.6% a year earlier.

We don't know precisely how many of these loans in arrears are buy-to-let, self-cert or more conventional residential lending, but it's a safe bet that buy-to-let make up a hefty proportion. After all, B&B was, through Mortgage Express, the pioneer of buy-to-let and the single biggest lender in 2006 when the market was at its most enthusiastic. Many were also acquired from that toxic beast in the market, GMAC, which sourced loans and packaged them up for sale to B&B.

A humbled B&B, whose mortgage book is now the painful responsibility of the taxpayer, reckons we may be some way from the peak level of arrears, forecasting they will increase through 2009 and into 2010.

Let's put these figures in perspective. During the worst year ever for arrears and repossessions, which was 1992, 3.55% of all mortgages were six months or more in arrears. It wasn't until 1994 that the Council of Mortgage Lenders started collecting figures for three-month-plus arrears. These peaked at 3.7% and then fell gradually to 0.87% in 2003. In other words, B&B's figures are grim by any standards, and are going to get worse.

Arrears are a lagging indicator; they reflect job losses, which only now are beginning to be felt across the economy. If B&B's figures are this bad when unemployment was below 2 million, just how bad will they be when joblessness hits 3 million?

Optimists may hope that B&B's arrears are statistical outliers. The industry average for arrears of three months or more remains at 1.88%. But maybe all this tells us is that other lenders simply haven't yet come clean. When Guardian Money first began criticising the volume of buy-to-let and self-cert lending back in 2005 we were greeted with derision from the mortgage industry. One report after the next was issued by the industry's various cheerleaders to vouchsafe buy-to-let as a copper-bottomed investment.

We had two concerns. One was the social impact of buy-to-let, with easy lending to tax-advantaged landlords crowding out loans to first-time buyers. That first step on the property ladder became ever more difficult as properties suitable for let – the one- and two-bed flats – were snapped up by landlords bloated with cheap buy-to-let finance. A side effect was the impact on existing flat owners when blocks were overrun by the buy-to-let merchants.

Our second concern was financial. The extraordinary volume of buy-to-let funding was pushing up house prices (and depressing yields) to unsustainable levels. It was a bubble waiting to burst, and it has.

I feel little sympathy for those who thought they could make easy money from buy-to-let. They were not "investing for their futures" as B&B liked to put it. They often did not put down a deposit and borrowed recklessly on fanciful (and sometimes entirely fake) prospective rents, which assumed perfect economic conditions for ever. They expected workers priced out of homeownership to toil away paying off their landlords' many mortgages in the most debased form of rentier capitalism.

What is absolutely infuriating is that we, the taxpayers, are now paying to bail out this bunch. No wonder so many people will be gathering outside the Bank of England's doors this week.