Surge in home repossessions if interest rates rise, warns top bank chief

Published 28th Jun 2011

Britain is facing a raft of home repossessions as soon as interest rates start to rise, one of the country's leading bankers has warned.

Richard Banks, CEO of UK Asset Resolution, the state company that runs the £80 billion of mortgages bailed out by taxpayers during the banking crisis, also said that the Labour government's pleas at the start of the crisis for lenders to keep families in their homes was forcing some homeowners further into debt.

UK Asset Resolution, which was set up to run the nationalised mortgages of Bradford & Bingley and parts of Northern Rock, has 750,000 customers and is the country's fifth-largest mortgage lender.

However, 23,000 of those mortgage holders are more than six months behind with payments.

Mr Banks told the Guardian newspaper that the projections for the number of people falling behind on payments could get 'scary' if lenders did nothing to prepare for higher rates.

'You can see if you don't do something about it, you can see a tsunami,' he said.

'If you don't get into the hills, you could get drowned by this. If you don't manage this properly, it could get very messy.

'It's a tough love approach,' he added.

'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.'

Yesterday, the international bank regulator said the Bank of England would have to raise interest rates to slow down inflation.

The rate has been 0.5 per cent for more than two years.

Yesterday it also emerged that the average mortgage rate has fallen to its lowest level since records began nearly 25 years ago.

A report from the financial information firm Moneyfacts revealed that average rates have never been lower since it started monitoring them in 1988.

For a homeowner with a £150,000 loan, the fall is saving them nearly £90 a month.

It comes as banks and building societies have rushed to cut their mortgage rates in recent months in the first price war since the credit crunch struck in 2007.

Source: ' ThisIsMoney '

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