Britannia Building Society has taken decisive action with its interest only mortgage customers in a bid to prevent what it sees as a potential time-bomb from going off.
The building society has decided to scrap charges and overhaul its communication practices for customers holding interest only mortgages.
Britannia has admitted that warnings about setting up appropriate payment vehicles for interest only mortgages in the annual mortgage statements were largely overlooked by customers.
The Council of Mortgage Lenders revealed last week that more than 20,000 borrowers have taken out interest-only mortgages without setting up any kind of repayment vehicle.
Britannia is taking steps to contact every interest only mortgage customer to encourage them to take control of their debt.
Head of credit risk Rajeev Sharma says: “As a responsible lender Britannia wanted to introduce a proactive approach to this industry wide issue. If customers want to address shortfalls by changing their mortgage type to a repayment mortgage, or repay early using a lump sum, then Britannia will waive all associated charges and fees to encourage them to do so. We hope by championing the cause through the media and improving our customer contact programme, the remainder will get in touch and take timely action.”
Premier Mortgage Services managing director John Malone says: “I applaud the Britannia. Now more and more lenders are trying to implement a retention strategy, like the Halifax, the lending fraternity has to include a methodology looking at ways of repaying mortgages within their retention strategies.”