UKAR Chief Executive Warns That Over 20,000 Customers Could Face Mortgage Arrears If Interest Rates Rise This YearUKAR Chief Executive Warns That Over 20,000 Customers Could Face Mortgage Arrears If Interest Rates Rise This Year

The chief executive of UK Asset Resolution (UKAR), who are winding down the loans of Northern Rock and Bradford & Bingley, affectionately known as “Britain’s Bad Banks”, has warned that thousands of its customers could be pushed back into arrears if there is a rise in Bank of England (BoE) interest rates.

UK Asset Resolution (UKAR), seventh-biggest mortgage lender said last week that they had repaid £6.2 Billion (GBP) to the UK Government in the 15 months to the end of March 2014, meaning it had so far paid back £10.4 Billion (GBP) of the £48.7 Billion (GBP) it owed.

However, if there is a rate rise it could potentially make it harder for taxpayers to get their money back after bailing out the bad banks.Chief Executive Richard Banks told the Reuters news agency in an interview that UKAR had benefited from interest rates remaining at record lows and the up-turn in the UK economy. He stated “We expect rates to rise around the end of 2014, making repayments harder for borrowers and we anticipate that if there was an interest rate rise of just 1%, another 22,000 customers could go into arrears. Small and often over a long period would be better than sudden, very large increases. UKAR have reduced arrears by working with customers in financial difficulty. It helps customers who have fallen behind on their mortgages to come up with repayment plans to prevent them having their homes repossessed and ensure the government eventually gets its money back”.

There is still a great deal of speculation about when interest rates will rise but Bank of England Governor Mark Carney said back in May that the Bank of England were edging towards an increase in borrowing costs.

The number of customers that are over three months in mortgage arrears fell by 39% to 15,500 in the 15 months through to the end of March 2014 and a further drop in numbers is expected this year.

UKAR made an underlying pre-tax profit of £1.26 Billion (GBP) in the 12 months up to March 2014, up £186 Million (GBP) on the year before.

Mr Banks said “We expect UKAR to sell parts of its mortgage book in the next few months having received approaches from potential buyers, enabling it to accelerate the pace at which it repays the government. We are always looking for opportunities to sell parts of the book. There are good opportunities to sell good-performing assets at full price. We are confident taxpayers will get back the money the government spent rescuing Northern Rock and Bradford & Bingley during the financial crisis and we expect the vast majority of the funds to be repaid within 10 years.”

UKAR sold a portfolio of former Northern Rock loans last year to U.S. private equity firm J.C. Flowers and debt recovery business Marlin Financial for a combined value of £400 Million (GBP).

UKAR have set aside £116 Million (GBP) to deal with past misconduct by Northern Rock and Bradford & Bingley, including compensating customers for mis-sold loan insurance.

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