Mortgage lending rates could top 8 per cent within a year, sending repossessions higher, warns Skipton Building Society chief executive John Goodfellow.
He believes the Bank of England base rate could rise by 1 per cent over the next 12 months, bringing the lending rate to over 8 per cent and pushing people into arrears and repossessions.
But he says repossessions are coming from a very low base and are inevitable after a sustained period of very high levels of debt and low but rising interest rates.
Goodfellow says: “They are starting from such a low point that if interest rates do not continue to go up it will not be a problem but I believe they will continue to go up. We ain’t seen nothing yet. Wait until rates get above 8 per cent.”
He also says that in the longer term, growing competition in the mortgage market and pressure on margins will see the sector becoming less attractive to banks.
Goodfellow says: “The mortgage market is moving towards low margins and low costs and those are not necessarily the sort of markets that are attractive to you if you are a plc-type company unless you can ramp up the volume. Mutuals can afford to deliver that model.”
See Mortgage Brief supplement for full interview