UK Asset Resolution, the state-owned lender set up to take on mortgages from Bradford & Bingley and Northern Rock, has 100,000 customers who could default on their loans. Many are landlords.
They took out interest-only mortgages and, says UKAR, have no credible plans to repay them.
The 100,000 account for one-sixth of UKAR’s total borrowers and are mainly buy-to-let borrowers.
Around 60% of UKAR’s total borrowers took out interest-only mortgages. Of this proportion, two-thirds have either no idea how they will repay the loan or only the haziest idea. Some 5% do not even know that they have an interest-only loan.
The majority of the interest-only mortgages will mature towards the end of this decade, leaving borrowers with an eight-year deadline.
Richard Banks, chief executive of UKAR, said that 10% of his customers are already in trouble with their mortgages.
UKAR also revealed that nationalised bank Bradford & Bingley repaid £788m of Government loans in the first half of the year, taking the total owed to the taxpayer down to £45.8bn.
The number of B&B mortgages three or more months in arrears fell 19% to 7,064.
Pre-tax profits at B & B fell from £202.5m in the first half of 2011 to £45.7m in the six months to the end of June, mainly because of increased interest on its loan from UK taxpayers.
When Bradford & Bingley was nationalised in 2008 the branches were sold and the mortgage book passed to UKAR along with part of the old Northern Rock business.
Banks said: “We have made strong progress in the first half with further repayments to the Government.
“Much of our focus is on helping those of our customers who are in financial difficulty and it is pleasing to see a further significant reduction in arrears levels despite the continued economic uncertainty and pressure on consumers’ finances.”
UKAR recently sold £465m of Northern Rock mortgages to Virgin Money, and will use the proceeds to repay more of its outstanding loan.
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