There could be debt problems for thousands of homeowners after a leading bank chief warned that a surge in the number of home repossessions would follow if the base rate of interest increases.
Richard Banks, Chief Executive Officer of UK Asset Resolution, the government company that manages the £80 billion mortgage portfolio of the bailed out banks, also warned that the government’s efforts to try and help people that are struggling with their mortgage debt (by keeping them in their homes), it could lead to more severe debt problems in future.
The organisation is the country’s fifth-largest mortgage lender and has around 750,000 customers, although 23,000 of those mortgages are over six months behind with payments.
It was set up by the government to run the mortgages of nationalised lenders such as Bradford & Bingley and parts of Northern Rock.
Speaking to the Guardian newspaper Mr Banks said that lenders need to adopt a tough love approach, and that the projected number of people falling behind on payments could get ’scary’ if lenders did nothing to prepare for inevitable higher rates.
He warned: “You can see if you don’t do something about it, you can see a tsunami.
“It’s treating customers fairly, not nicely, because if you can’t afford your mortgage, you are only increasing your indebtedness.
“If we allow you to increase your indebtedness, that’s not really fair to you.”
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