Former Bank of England economist Dean Buckner said widespread mortgage defaults could spark a Northern Rock-style run on the banks
The building safety scandal could lead to the next banking crisis if leaseholders are forced to pay for repairs, MPs were warned yesterday.
Widespread mortgage defaults could spark a Northern Rock-style run on the banks, former Bank of England economist Dean Buckner said.
His warning came after campaigners told the Commons Housing Select Committee that ministers needed to ask them for a spreadsheet of building safety data because they ‘had no handle’ on the scandal themselves.
Meanwhile, Housing Secretary Robert Jenrick’s plans to end the crisis were blasted as a ‘betrayal’ of leaseholders by Tory MPs.
Mr Jenrick has set aside £5billion to replace unsafe cladding on buildings above 18 metres in height.
But hundreds of thousands of families living in smaller blocks face bills of up to £600 a year.
Mr Buckner, who is now advising charity Leasehold Knowledge Partnership, told the select committee that unaffordable bills would cause borrowers to default on their mortgages.
He said this would erode capital lenders have set aside to ‘absorb losses’, adding: ‘If banks become clearly in trouble, that then affects all of us, because we all have money with banks.’
Dr Will Martin, co-founder of the End Our Cladding Scandal campaign, had earlier told MPs that the Government had no idea how widespread the problem was.
He said ministers asked campaigners at a meeting in 2019: Can we have your Excel spreadsheet with all of your building data on?
Dr Martin who lives in a building in Sheffield with fire safety defects, added: They have no handle on the scale of this problem – and they have no handle on the scale of all the other problems that are plaguing these buildings.
The Government has identified 419 high-rise buildings with the same cladding as Grenfell Tower. Of which, 216 have been fixed, the government says.
But it still has not given a firm estimate of buildings that have other forms of dangerous cladding.