Barclays 2013 Annual Report Download - page 170

Risk review
Credit risk continued
The properties in possession portfolio in South Africa is comprised entirely of ‘Other Real Estate Owned’. The reduction in 2013 is due to a more
cautious approach adopted for taking ownership of properties at auction when the reserve price is not met, and improved sale processes for
existing properties.
Foreclosures in process in the European mortgage portfolios increased driven by the continuing charge-offs. Foreclosures in process and property
in possession stocks are increasing and are impacted by the increasing time to repossess and sell property.
Exposures to interest-only home loans
The Group provides interest-only mortgages to customers, mainly in the UK. Under the terms of these loans, the customer makes payments
of interest only for the entire term of the mortgage, although customers may make early repayments of the principal within the terms of
their agreement.
Subject to such early repayments, the entire principal remains outstanding until the end of the loan term and the customer is responsible for
repaying this on maturity. The means of repayment may include the sale of the mortgaged property.
Interest-only lending is subject to bespoke underwriting criteria that includes: a maximum size of loan, maximum LTV ratios, affordability and
maximum loan term amongst other criteria. Borrowers on interest-only terms must have a repayment strategy in place to repay the loan at
maturity and a customer contact strategy has been developed to ensure ongoing communications are in place with interest-only customers
at various points during the term of the mortgage. The contact strategy is varied dependent on our view of the risk of the customer.
Interest-only mortgages comprise £53bn (2012: £53bn) of the total £123bn (2012: £115bn) UK home loans portfolio. Of these,
£45bn (2012: £46bn) are owner-occupied with the remaining £8bn (2012: £7bn) buy-to-let.
Exposure to interest only owner-occupied home loans
As at 31 December 2013 2012
Interest-only balances (£m)a44,543 45,746
Of which:b
Performing balances 37,050 37,919
Non-performing balances 218 239
90 day arrears (%) 0.3 0.3
Total impairment coverage (bps) 2 3
Marked-to-market LTV:
Balance weighted % 54.2 58.8
Valuation weighted % 42.4 45.1
Marked-to-market LTV: Performing balances
Balance weighted % 55.0 58.7
Valuation weighted % 42.3 45.1
Marked-to-market LTV: Non-performing balances
Balance weighted % 71.7 74.1
Valuation weighted % 56.5 59.0
For >100% LTVs:
Balances £m 765 1,239
Marked-to-market collateral £m 669 1,133
Interest-only home loans maturity years:
2014 812 877
2015 875 985
2016 1,183 1,324
2017 1,582 1,707
2018 1,659 1,763
2019-2023 8,815 9,138
Post 2023 29,466 29,057
The average balance weighted LTV for interest only owner-occupied balances reduced to 54.2% (2012: 58.8%) driven by appreciating
property prices.
Total impairment coverage at 2bps (2012: 3bps) is broadly in line with overall portfolio performance and highlights improvement year on year
as a result of portfolio quality.
Notes
a Includes forborne interest-only loans. 2013 balances include the impact of the acquisition of Barclays Direct. Balances also include the interest only portion of the Part and Part UK
owner-occupied portfolio. A Part and Part Home Loan is a product in which part of the loan is interest only and part is amortising.
b Performing and non-performing balances do not include the interest only portion of the Part and Part book which is £7,725m (2012: £7,587m).
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168 Barclays PLC Annual Report 2013