A rise in interest rates will trigger a "tsunami" of repossessions, a leading banker has said.
In an interview with the Guardian, chief e…
A rise in interest rates will trigger a “tsunami” of repossessions, a leading banker has said.
In an interview with the Guardian, chief executive of UK Asset Resolution Richard Banks said there is a danger banks will have followed the wrong approach by being too lenient with those who are struggling to meet their mortgage debt.
The man who is in charge of the £80 billion of home loans in the nationalised banks told the news provider this has come about because there has been political pressure on lenders to show greater forbearance.
A better approach would be to show “tough love”, Mr Banks argued, adding: “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.”
Those who are facing mounting debt, the threat of repossession and the prospect of it all becoming unpayable may wish to consider an individual voluntary arrangement (IVA).
It works by negotiating lower repayments with creditors and is binding on all of them if at least three quarters of them agree to the deal.
This means lower repayments per month and interest frozen, with the new monthly amounts being paid over a period of no more than five years, at the end of which everything is written off.
Last week, Ray Boulger, the senior technical manager at John Charcol, said the greatest danger of an increase in repossessions in the next year will be because the Bank of England will raise rates “too quickly” for homeowners to adjust.
By Joe White