According to Richard Banks, CEO of UK Asset Resolution, the country is facing a sharp rise in repossessions once interest rates begin to rise.
UK Asset Resolution is the state company which was set up to manage the £80 billion of mortgages formerly owned by banks, which were bailed out by taxpayers during the banking crisis. The company runs the nationalised mortgages of Bradford and Bingley and parts of Northern Rock, and is the UK’s fifth largest mortgage lender with 750,000 customers. The worry is that 23,000 of these customers are already more than six months behind with their payments.
Banks feels that the projections for those falling behind could become a real problem if lenders don’t prepare for it. His worry is that banks are encouraging customers to get further into debt due to the previous governments pleas for lenders to keep families in homes.
He said “You can see if you don’t do something about it, you can see a tsunami. If you don’t get into the hills, you could get drowned by this. It’s a tough love approach, 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.”
This bleak view comes as latest figures show the economy grew by just 0.5% during the first quarter of the year. Household consumption fell by 0.6% which is the biggest fall since the height of the recession in 2009. The annual growth rate was also revised downwards slightly to 1.6% from 1.8%. The only good news is that the Bank of England is likely to keep interest rates at their current record low levels for the foreseeable future, so beleaguered home owners can breathe easy for a while longer.