British Bankers’ Association chief executive Anthony Browne says he is aware of concerns about an interest-only mortgage timebomb and will work to prevent a fresh misselling scandal.
During a Treasury select committee evidence session on macro-prudential tools today, Conservative MP Andrea Leadsom asked Browne whether interest-only is a “ticking timebomb” as borrowers come to the end of their mortgage terms without having paid down the equity.
Speaking to the TSC in March, FSA managing director Martin Wheatley first said there was a “ticking timebomb”, claiming the FSA is powerless to stop it.
Browne said: “It is something that various people have raised with me since I started this job six weeks ago. It is certainly something I want to get satisfaction on that there is no significant problem and the industry is doing everything it can.
“One of the things I am determined to do in this job is to make sure there is no more alleged misselling or no more scandals. I want to make sure we do what we can to make sure the industry is as customer-focused as possible. When there are concerns like interest-only then I take them seriously. I will certainly satisfy myself that everything that can be done is being done.”
Council of Mortgage Lenders director-general Paul Smee rejected the claims there is an interest-only timebomb approaching and said there is a “relatively small” number of interest-only deals.
He said: “In the next few years we feel those on interest-only mortgages will either have a means of repayment or have equity in their house.
“Lenders will be looking very sympathetically on how they can help come to an arrangement. They are already in dialogue with lenders as there is a regulatory requirement to contact borrowers during the life of the loan and many lenders are doing more by contacting borrowers at an early stage.”
In the last month, Nationwide has stopped interest-only mortgages on new lending and Royal Bank of Scotland has stopped all non-advised interest-only sales. HSBC, Lloyds Banking Group, Barclays, Coventry Building Society and Yorkshire Building Society have all committed to the sector.