Interest-only mortgage borrowers formerly with Northern Rock and Bradford & Bingley will this week receive letters demanding to know how they plan to pay off their loans.
Government-controlled UK Asset Resolution, which took on the business after the lenders collapsed in 2007 and 2008 respectively, is writing to 30,000 borrowers.
The capital debt on interest-only mortgages becomes repayable at the end of the term and there is mounting anxiety about where the money is to be found. Many borrowers are expected to have to sell their homes to settle the loan.
UKAR’s mailing is aimed at the first tranche of implicated borrowers, whose mortgages are payable up to 2023. It includes the message: ‘Every day is one day closer to when you will have to repay your loan in full. It is important you put a robust plan in place for when that day comes or you could find yourself in a very difficult position.’
Borrowers who do not respond will receive follow-up mailings and phone calls.UKAR spokesman Tim Newman says many borrowers have already made arrangements.
More... Have an interest-only mortgage deal? Expect a hike in repayment costs as more banks decide to axe low-cost plans Couple unable to pay its interest-only mortgage 'bullied and intimidated' by government agency Looking to buy? Find a mortgage Mortgage monthly interest calculator On the hunt for a home? The first-time buyer's guide to getting a mortgage and climbing onto the property ladderHe adds: ‘Many took out their mortgages a long time ago and the loans are small and the equity in their property substantial.’
Other banks – notably the lending divisions of Lloyds Banking Group – have been criticised for the ‘frightening’ and ‘alarmist’ tone of letters to borrowers in similar positions.
It emerged last week that the pay of UKAR’s boss Richard Banks increased last year by eight per cent to £643,000.