Crisis to hit one homeowner in 10, warns watchdog

My Account
Logout

Create an Evening Standard Account

Use your social network

Save time by using your existing account to sign in to Evening Standard

We'll never share your information or post anything to your account without your permission

Welcome! Sign in here

Use your social network

Save time by using your existing account to sign in to Evening Standard

We'll never share your information or post anything to your account without your permission

Forgot your password ?

Registration

* indicates fields that are mandatory

Email *

Password *

Confirm Password *

First name *

Surname *

Postcode *

Country *

Mobile phone number

Username *

Gender *

Year of birth *

When you sign up...

You will have access to all our online competitions, discounted offers and can post comments on our site.

You will also receive The Weekender newsletter sent every Thursday - it’s full of fantastic offers and ideas for the weekend. You can update your email preferences in your account page when you log in.

Other newsletters and emails

Homes & Property Newsletter - Yes I want to receive the weekly email with all the latest news on property in the capital

Occasionally we would also like to send you relevant emails detailing specific offers either from ourselves or carefully selected partners. If you would prefer not to receive these then please tick the appropriate boxes below. We will never pass on your details.

I do not want to receive additional offers and information from the Evening Standard

I do not want to receive additional offers and information sent by Evening Standard on behalf of carefully selected partners

Terms and Conditions

* I have read, understood and agree to be bound by the terms and conditions of Evening Standard

Registration

Mail Sent for Registration Confirmation.

A confirmation email has been sent. Please activate your account by clicking on the activation link sent in your mail box.

In its starkest assessment of the fallout from the subprime and Northern Rock crises, the top financial regulator told lenders and customers they must be prepared for what lies ahead.

Clive Briault, head of the FSA's retail division, said: "We know that at least 1.4 million short-term fixed rates will end in 2008. 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, which will leave them facing a significantly higher interest rate on their mortgage, which may prove too much for many of them to afford."

That could lead to a surge in repossessions to levels not seen for almost a decade. Briault continued: "Moreover, subprime borrowers may not have access to the market at any price, at least until the normal market mechanism of risk-adjusted pricing returns."

He added that the latest forecasts show house price growth is slowing rapidly and it remains to be seen how far the "events of the last summer", as the Treasury so nicely calls them, will effect the real economy.

The FSA has been at loggerheads with the Treasury and the Bank of England over who was responsible for the fate of Northern Rock since the run on the bank in September. Briault said: "It would be prudent to assume that market conditions will remain very difficult for a sustained period.

"Against that background, the negative impact of any adverse macro-economic and credit shocks could be considerably magnified with consequences for the balance sheets of mortgage lenders. So there is a real prospect that conditions will worsen further."

In a clear reference to the failure of Northern Rock, Briault said: "We want there to be a competitive and thriving mortgage market in the UK which clearly meets the needs of consumers.

"This requires lenders who have clear strategies that take account of the changing world with viable funding methods, and boards and managements that understand and know how to operate in the best interests of customers in a variety of market conditions."