Campaign to help mortgage customers avoid repossession

The firm is to write to 26,000 customers who have 10 years or less to run on their mortgages to give them advice about how to overcome any funding shortfalls so they can keep their homes if they run into problems.

Interest-only mortgages were a controversial means of helping cash-poor customers get on the housing ladder before the banking crisis.

Customers were supposed to set up a method of paying off the repayment at the end of the mortgage term and therefore only paid the interest on the loan on a monthly basis. Some customers relied on inheritance windfalls or even a rise in property values to make the final repayment.

UKAR will start mailing and phoning these 26,000 customers from April to talk through their repayment options.

UKAR’s chief executive Richard Banks estimated that a third of these customers have a repayment vehicle sorted out, a third said they think they know what they will do and a third have not thought about it. A worrying five per cent don’t realise they have an interest-only mortgage.

“For the two thirds who are not sorted, we don’t want them to lose their house,” said Mr Banks.

“They’ve got plenty of time to put something in place. House price inflation may help. Can they put savings aside or change their behaviour? It’s all manageable.”

The average mortgage on UKAR’s books is £120,000.

“Small adjustments now could make a vast difference,” said Mr Banks. “It’s not meant to be scary. We want to make sure our customers are not staring into the abyss. We want to avoid people getting into further debt.”

UKAR has a good record of helping customers to avoid getting into arrears through pro-active campaigns.

Yesterday the company announced a 23 per cent fall in the number of mortgages three or more months in arrears in 2012 to 25,581, down from 33,216 in 2011. This far exceeds the two per cent decline in the market.

“This is a stunning performance,” said Mr Banks. “It’s a testament to the work of our colleagues. We’ve successfully put the two organisations together and we’re increasingly training people and bringing new people in to drive down arrears.”

UKAR also announced it has repaid £4bn back to taxpayers, who bailed the banks out at the height of the banking crisis. This is ahead of targets of £2.6bn and last year’s £2.8bn repayment.

The group’s debt to the Treasury has fallen from £48.7bn when UKAR was set up in October 2010 to £43.4bn.

Mr Banks estimates the vast majority of the debt will be paid off within the next 10 years.

UKAR set aside another £130m in 2012 to compensate customers mis-sold payment protection insurance (PPI) by Northern Rock, taking its total bill for PPI to £368m.

It also said a paperwork mistake, uncovered last year, will cost it about £271m in repayments to customers.

Mr Banks said the outlook for the UK economy is “somewhat more positive” than a year ago. Over 150 staff working in Newcastle have agreed to transfer to the group’s offices at Doxford in Sunderland or Crossflatts in West Yorkshire.

This figure represents just over a third of the total staff in Newcastle.

“This is good for both UKAR and our customers as we have retained good people with a great deal of knowledge,” said Mr Banks.

UKAR was formed in October 2010 to manage the loan books of B&B and Northern Rock after the former building societies failed during the financial crisis.

The firm now has almost 615,000 customers with 587,000 mortgage accounts and 228,000 unsecured personal loan accounts.

UKAR said the majority of these loans are performing well with over 90 per cent of mortgage customers up to date with their mortgage payments.

The company works with a range of non-fee charging debt advice agencies to help customers reorganise their finances and ensure, if possible, that they can continue as homeowners.

Research conducted by YouGov and the Money Advice Service shows that individuals who seek advice are twice as likely to have their debt become manageable within 12 months compared to those who do not.