Success of campaign to warn of payments shortfall

UK Asset Resolution (UKAR), whose job is to maximise value for the taxpayer after the two banks were bailed out at the height of the banking crisis, said that out of the 18,000 customers it has contacted so far, 45 per cent have responded giving details of their repayment plans.

UKAR’s chief executive Richard Banks said: “This is a very high response rate to a marketing campaign. Normally one per cent is a good result.

“It’s very encouraging that customers are prepared to disclose their arrangements. Some customers are changing their behaviour as a consequence of our enquiries.”

UKAR is in the process of contacting 27,000 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 could keep their homes.

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

Mr Banks said the interest-only campaign has received “an excellent response” so far with 90 per cent of customers saying they have a viable plan to pay off the mortgage once it comes to an end.

He was speaking yesterday as UKAR said that the Government’s Help to Buy scheme could speed up the repayment of its £42bn taxpayer loan by lifting house prices.

Help to Buy allows people to buy a home with a deposit of just five per cent.

Mr Banks said this could help lift customers out of negative equity – where loans exceed the value of their homes.

“If house prices go up outside London, it is a good thing for us as quite a few of our customers are trapped by their high loan-to-values,” he said.

UKAR hopes that as house prices go up in the North and elsewhere outside London, customers will be able to re-mortgage with another mortgage provider, allowing UKAR to pay off the Government loan more quickly.

UKAR is responsible for the day-to-day administration of the Government’s Help to Buy scheme, which has helped thousands of buyers get on the housing ladder.

The contract has led to the creation of a number of new jobs in Bradford.

UKAR employs 1,200 people at its head office in Crossflatts in a total workforce of 2,400.

It also has a large call centre in Sunderland.

In the six months to June 30, UKAR paid back £1.9bn to the taxpayer following the banks’ bailout during the height of the banking crisis, up from £1.2bn in the first half of 2012.

Its underlying pre-tax profits rose 10 per cent to £529m after arrears fell 17 per cent to 21,332 since the start of 2013.

The number of repossessions fell from 3,871 to 3,550.

UKAR has 584,000 customers with 565,000 mortgage accounts and 212,000 unsecured personal loan accounts.

Mr Banks said the majority of these loans continue to perform well with more than 90 per cent of mortgage customers up to date with their mortgage payments.

“However, we do have a significant number of customers who are finding it difficult to meet their repayments. In those cases, we work closely with customers to offer a range of solutions,” he said.

During the first half, 37,000 arrangements were completed and 1,200 account modifications were made to help customers pay their mortgage.

Mr Banks said these modifications include payment breaks, a temporary switch to interest-only mortgages and payment term extensions.

UKAR is also working with a range of non-fee charging debt advice agencies such as the Citizens Advice Bureau, Payplan and StepChange to help customers reorganise their finances and keep their homes.

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.

The number of UKAR customers referred to debt advice agencies in the first half of 2013 was 2,413, similar to last year’s figure.

Mr Banks said the book’s improving health will increase its attractiveness to potential buyers.

“The better the economy, the fewer customers are in arrears and the more valuable these loans will be,” he said.

UKAR recently launched a new campaign to help thousands of customers who are about to retire before paying off their mortgage.

UKAR has identified pensioners as the next high risk area where customers could fall into arrears.

Mr Banks said: “Around 90,000 customers will still be paying back their mortgage when at least one of the joint account holders retires. It’s an area we want to understand better.”

UKAR has launched a marketing trial to find out the issues facing people nearing retirement age.