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Nationwide director warns of big arrears rise if rates increase

Increases in the bank rate could force lenders to adopt harsher repossession strategies, according to Nationwide.

Speaking at the Great Housing Market Debate in London last week, Nationwide group distribution director Matthew Wyles said the cost of managing arrears has been lower than in previous downturns because of the record low base rate of 0.5 per cent. He said: “If you look at the horrible recession of the early 1990s, the base rate doubled from 7 per cent to 15 per cent. Trying to pay those mortgages broke most perfectly responsible borrowers in two. We have had the reverse effect this time round as interest rates fell significantly.

“It has made mortgages more affordable but it means the cost of risking a roll-up of arrears has also been much lower for the banks, so we have been able to cut people some slack.”

Wyles warned the Bank of England that the situation “could quite easily go into reverse if rates start to rise with any degree of rapidity”.

Simplicity Financial Services principal Chris Downham says: “If rates went up, it would cost banks more to look after these people. If interest rates increased by any more than 0.5 per cent, I think it would cause massive issues for some borrowers.”


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. How much does Matthew Wyles get paid? He is a genious? I wish I could get his money for uttering the obvious. He and his banking friends are partly responsible for this mess and his company is doing its level best to ensure that small mortgage intermediaires are blown into oblivion with their dual pricing policies and unfair market practices. Suggest he goes home and has good look in the mirror as to what he should be doing iwth himself.

  2. and this is news? This has been known since rates fell to 0.50% in 2008/09, middle england is living on borrowed money. The squeeze on incomes now is at the expense of the saving on mortgage interest, as soon as that rises, and it will, look out banks cos you are going to be in a bigger mess than we all thought possible.

  3. Then why did you lend them all that money in the first place?

  4. You should have thought about this before you jumped on the back of the largest property lending bubble in history.

  5. If people are going to get into trouble because rates have to rise to say even 2% then so be it. Even 2% would be an historical low level looking back over the last 50 years.
    I am sick and tired of reckless borrowers being wrapped in cotton wool, why should the prudent and sensible have to suffer. And lets not forget many of these “troubled” borrowers would have borrowed at a much higher rate than it is now, did they not plan for the possibility of a rise at some point in the future.

  6. What he forgets to say is that these rates are not normal but ’emergency’ rates that should have been lifted some time ago. Of course life is going to be easier when you have someone else subsidising your lifestyle. Borrowers have already had too much of a free ride. It time it stopped.

  7. Did they also mention that the reason arrears would rise is that nearly half of all mortgages taken out in from 2000 to 2010 were self-certified mortgages so they could overstate their income to get a much bigger mortgages than they could be expected to pay back if rates were at a normal level?

  8. Lets face it, inteest rates ARE going to go up, when ever, but definately soon. If people are struggling now with low interest rates, then I have no sympathy for them when raters increase, as they must have got out their mortgage as an irresponsible borrower, so are a liability to the banks and to themselves.

    Roll on he repos…………………

  9. al young | 23 Apr 2011 11:39 am

    Then why did you lend them all that money in the first place?


    Also why did people borrow money when they would struggle to pay it back?

    I know poeple who signed up for crazy self-certified deals. However there are two parties to the contracts. The banks/ building societies cannot force people to sign a contract. I didn’t borrow more than i thought i could afford (although it was an option).

    Most likely the answer is that these people thought that the boom would last forever and would get rich. Of course these days people don;t want to take responsibility for their own actions when it is easier to blame someone else

    Greed is not limited to banks.

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