The chief executive of the government-controlled company said it was contacting interest-only mortgage customers of both banks to find out how they planned to pay off the loans, as part of a programme of “proactive arrears management”.
Commenting on UKAR’s annual report and accounts for 2012, Mr Banks said: “We are concentrating our efforts on spending more time talking to our customers about their financial situation, with a particular focus on customers with interest-only mortgages.
“This involves contacting customers to discuss their plans to repay their mortgage at the end of their term. For most, this is not an immediate issue, but the mortgage market and house price inflation have changed dramatically.
“Currently, 56 per cent of accounts are interest-only, although 76 per cent of these have over ten years until they are due to be repaid.”
Data from Moneyfacts in February, revealed that just 22 providers now offered interest-only products, compared to 79 in 2007.
Mr Banks said that the lack of interest-only products currently available on the market necessitated a need for customers to adapt to the new environment to ensure they met their commitments and protect their homes.
He added: “In some circumstances, the most appropriate cause of action is for customers to sell their homes, and we support this process wherever possible through assisted voluntary sales”
A spokesman for the Financial Conduct Agency said that a thematic review commissioned by predecessor the FSA into the state of the interest-only market, and the number of customers who did not have a repayment vehicle, would be published during the second quarter of 2013 amid fears of an impending interest-only “timebomb”.
The 120-page report also revealed that UKAR had paid back some £5.2bn of government funding from the nationalisation of Northern Rock and Bradford & Bingley since it was formed in 2010, including £3.1bn during 2012.
The number of mortgage customers fell to 587,000 during 2012 (compared to 638,000 in 2011) as credit-worthy customers refinanced their mortgages and moved to other providers.
Mr Banks said it was inevitable over time that the nature of its loans book would change, with only the customers with poorer credit scores eventually remaining.
The loan books are closed to new business, however, it has been reported that UKAR will be in charge of running the government’s mortgage guarantee scheme from January 2014.
