LONDON, June 3 (Reuters) - The boss of Britain's "bad bank", which is running down the loans of two bailed out lenders, has warned that a 1 percent rise in interest rates could cause thousands more customers to fall behind with mortgage repayments.
UK Asset Resolution (UKAR) is winding down the loans of Northern Rock and Bradford & Bingley, which were nationalised during the 2007/8 financial crisis.
UKAR's Chief Executive Richard Banks said he expected rates to start rising again around the end of 2014.
"If interest rates rise the impact on our customers depends on how quickly they rise. We anticipate that if there was an interest rate rise of 1 percent another 22,000 customers could go into arrears. Small and often over a long period would be better than sudden, very large increases," Banks told Reuters in an interview.
Last year mortgage arrears among UKAR's customers fell by 39 percent to 15,500 as it benefited from interest rates remaining at a record low.
Reporting by Matt Scuffham