UK state-owned UKAR repays more than £10bn to taxpayer

The state-owned organisation that is whittling down the old loan portfolios of Northern Rock and Bradford & Bingley has repaid more than £10bn to the taxpayer since its creation in 2010.

The funds have mainly come from customers repaying the loans that were stripped out of the failed lenders and merged into UK Asset Resolution to be run down.

The group repaid £5.1bn of government funding in the 15 months to March 31 - an extended reporting period that brings UKAR's financial year in line with the Treasury's - as it reduced its loan book by 11 per cent to £61.2bn. UKAR paid back an additional £1.1bn through interest, taxes and fees.

Its outstanding government loan stood at £38.3bn at the end of March, down from an initial £48.7bn.

UKAR has been looking for ways to accelerate repayments, such as selling portfolios of loans, after it warned it could take a decade to return the government's funds in full.

Announcing full-year results on Tuesday, it said rising interest rates could make it harder for some customers to repay.

"Many households continue to be under financial pressure. This, together with the prospect of interest rate rises and higher mortgage payments, will be a concern for many of our customers," it said.

One particular issue for UKAR is the number of customers on interest only loans that are set to mature within the next 10 years.

UKAR identified and contacted 31,000 customers with these loans to check whether they would be able to repay the capital at the end of the term.

Richard Banks, chief executive, said that of the 50 per cent that responded, 5 per cent - about 1,500 customers - were unaware they had interest-only loans. Another 13 per cent - about 4,000 - admitted they did not have proper repayment plans in place.

Borrowers with interest-only loans do not make capital repayments so still owe the initial mortgage sum at the end of the term. Policy makers are concerned that some customers will be unable to repay these loans and will have to sell their homes.

Almost half of UKAR's customers have interest-only loans, although most of the outstanding sums on those maturing within 10 years are comparatively small - typically about £40,000.

UKAR reported an underlying pre-tax profit of £1.5bn for the 15-month period. In the year to March 31 it produced a £1.3bn underlying profit, £186m higher than the previous year, driven by a lower impairment charge.

Overall the group has reduced its balance sheet by more than a third since 2010 - from £115.8bn to £74.9bn.

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation