Richard Banks is the chief executive of UKAR (UK Asset Resolution, this was formed from the remains of what was Northern Rock and Bradford and Bingley. He believes that rising interest rates will create a tsunami of repossessions similar to that of the 1990s, during this time the courts were full with families being forced out of their homes through repossession orders. Mr Banks feels that although forebearance is nice for some homeowners, whereby the mortgage lenders allow special circumstances for families to remain in their homes and delay repossession, he feels that it is not fair in the long run as they continue to get further into mortgage debt.
It is believed that 40,000 homes this year alone will become repossessed with Northern Rock offering forebearance to 44,000 homeowners last year. Officials believe that 1 in 8 homeowners are being offered special terms by their lenders and with the cost of borrowing set to rise these families will no doubt face repossession. Mr Banks feels that lenders should warn families about the impact of higher rates and contact those who they feel are most likely to default and try and get them to pay on time. He thinks that of the total 750,000 mortgages at the moment, around 23,000 are six months behind on them.
UKAR is often referred to as a â€œbad bankâ€ because it holds the higher proportion of riskier loans. Those include those homeowners who had self-certified mortgages so they did not have to provide proof of earnings to gain the mortgage in the first place. Mr Banks believes that Labour is partly to blame as they encouraged mortgage lenders to try and keep families in their homes and advised them not to be strict with borrowers. This is fine when interest rates are low, but when they rise which is inevitable, repossessions will rise also.
Fiona Davies is a director at The Property Fairy.
She has worked in the land and property sector for the last ten years.
All articles on the website are written uniquely by her.
This article is copyright free.