The Blackstone Group is entering the mortgage business with the acquisition of a prime mortgage lender even as analysts fear troubles in the subprime sector will spread to other parts of the market.

Blackstone's private equity group will buy the retail mortgage originator, PHH Mortgage, from GE Capital, which is buying parent PHH. GE Capital is paying $1.8bn (€1.3bn) to buy PHH, including the mortgage company as well as PHH Arval, a North American fleet management services provider.