Barclay`s CEO Fears Interest Only Mortgages Scandal

The new Barclay`s chief executive – Antony Jenkins has expressed some concerns that the mis-sold interest-only mortgages , not paid when they reach maturity, could be the reason for a huge financial scandal.

“We spend a lot of time trying to look over the horizon to what might be complaints in the future such as interest-only mortgages”. he also explain that there is a small number of Barclays borrowers, who were in a position to lack enough resources to fund their loan.

The interest-only mortgages are a type of a home loan, where the borrowers are required to pay off only the interest until the maturity date, when they are will be asked to pay off the full sum borrowed. During the period when the house prices were high the banks used to lend higher amounts for the interest-only loans, than they would with a regular repayment scheme.

However, at this stage it could be seen by regulators as an irresponsible action which has placed borrowers in an unfavourable situation now house prices have dropped.

The Financial Services Authority declared that they would be “monitoring the issues” surrounding interest-only mortgages which mature without the borrower having the means to pay off the full amount.

Barclay`s CEO has promised that they will act fairly to the borrowers, who are unable to repay their loans when they mature. “We are trying to communicate frequently as these loans reach maturity and to help if a source of repayment for the loan hasn’t happened”, he stated. He added: “We will be monitoring the issues that arise when interest-only borrowers reach maturity without the means of repayment and will examine the strategies in place across firms and their compatibility with the fair treatment of customers.”

In the recent years banks faced a wide range of mis-seling scandals, so now they fear the interest-only mortgages will be the next bank fiasco.

See also:

Loan Agreement