Clive Briault, retail managing director of the FSA, confirmed the figure in a speech at the Council of Mortgage Lenders annual conference, and warned that many of these customers would face extremely difficult times when they come to refinancing.
He said: “Many of these borrowers are on relatively high loan-to-value ratios or income multiples and will find it difficult, if not impossible, to refinance their mortgage on favourable terms. This will leave them facing a significantly higher interest rate on their borrowings, which may prove too much for many of them to afford.”
He went on to warn lenders to make sure they are complying with the FSA’s rules and treating customers fairly when handling cases of mortgage arrears and possessions, as it had found a ‘consistent picture’ of lenders unwilling to consider cases on an individual basis.
Briault also announced that the FSA would launch a thematic review on arrears management and said it will be done ‘as a matter of urgency’.
Richard Morea, technical manager at London & Country, said: “The shock will come when customers come off a two-year fixed rate and the rate will be a lot higher. That’s where there will be difficulties of affordability.”
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