Warning Over 'Messy' Mortgage Debt

29/06/11

By Charlotte Birch

A leading banker has warned that things could become "very messy" for homeowners if interest rates start to increase.

Richard Banks, the chief executive of UK Asset Resolution (Ukar), highlighted fears that a large amount of borrowers face having their homes repossessed if they struggle to keep up with mortgage repayments.

Mr Banks told the Guardian newspaper that lenders had not been strict enough, resulting in mounting debts for some customers.

Mr Banks, whose organisation was established to take charge of nationalised mortgages of Bradford & Bingley and parts of Northern Rock following the banking crisis, 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. If you don't manage this properly it could get very messy."

Some 23,000 of Ukar's 750,000 mortgage holders are more than six months in arrears, he added.

The Bank of England interest rate has remained at 0.5 per cent for more than two years.