Lenders forced to pay homeowners to quit their mortgages

A growing number of British homeowners are benefiting from the troubles of struggling mortgage lenders by receiving giant payoffs to refinance with other providers.

It's believed that many UK lenders are paying individuals to quit their mortgages by making payments, which in some instances have run into hundreds of thousands of pounds.

With the securitisation markets in effect closed, many lenders have hit the wall, while others are being forced to run their lending books down. Until recently some struggling lenders had waived early redemption charges to encourage people to refinance. However, in the last few months many been forced to provide greater incentives to speed up any wind downs.

"We have heard of people receiving payments of as much as £400,000 on some larger mortgages around the £2m mark," said Simon Gammon, managing director of Knight Frank Finance. "Firms are having to make payments to borrowers to bring their loan to value numbers into line. If they don't, they'll be saddled with these mortgages for much longer than they want."

The aggressive actions comes as the Bank of England revealed that as many as 1.1 million households were now in negative equity.