In a world where the biggest companies, banks and credit unions are all struggling to cope with a massive and unsustainable global economic downturn, one of the biggest lenders has quietly stepped into the breach.
Borrowing giant Jumbo Loan, which provides loans in the UK, Ireland and Northern Ireland, announced that it will stop servicing its customers’ mortgages in April and will instead offer new customers a low interest rate option for up to 12 months.
The announcement comes amid concerns that Britain’s biggest lender is struggling to manage the fallout from a banking crisis that has left tens of thousands of people jobless, while its main rival, the UK’s biggest credit union, Lloyds, has seen its stock price plummet by more than 20%.
Banks are struggling to provide their customers with affordable mortgages.
Some have stopped offering mortgages in response to a rise in defaults and defaults rates.
The crisis has led to a massive increase in the amount of household debt in Britain, with the average household borrowing amount now £1,250 a year, compared with just £200 a year a decade ago.
The Financial Times reported last week that the UK household debt figure is likely to increase to £3.5 trillion by 2020, rising to £7.5 billion by 2022.
Banks have been struggling to offer low-interest loans to its customers, but this is the first time they have stepped in to provide a lower interest rate, the Financial Times said.
Banks including Barclays, Lloysbank and HSBC said they would stop servicing loans in April, and Lloyns, the biggest credit card provider, said it would also stop offering mortgages.
The announcement from Jumbo loan follows similar moves by Lloyd, Lloydars and Credit Suisse.
Bubbles in the economy are also being caused by the rise in the cost of borrowing, which has led banks to ramp up their lending.
Jumbo said it is working with its clients to understand their needs and how they might be affected.
“Jumbo has always believed that it is important that all our customers receive a great deal of value from their loans,” a spokesman said.
“This means that we have taken the extraordinary step of not only reducing the interest rates but also reducing the servicing fee to 1.9 per cent of the amount outstanding.”
Jumbo loans can be made with an interest rate of 1.25 per cent and are subject to a 1 per cent down payment.
However, customers must agree to pay all of the outstanding balance in advance, which can take months.
“Jumbolos loans are very similar to other consumer loans, meaning they are subject for the same terms as other consumer credit,” the spokesman said, adding that Jumbo would offer a new offer of an interest-only loan at an interest of 1 per percent.