RBS throws lifeline to homeowners

but critics dismiss six-month breather before repossession as little more than a marketing ploy

By Nicky Burridge

Published:

The Royal Bank of Scotland announced yesterday it would give struggling homeowners at least six months’ breathing space before it launched repossession action.

The move was welcomed by housing charities, but critics dismissed it as little more than a “marketing ploy”.

Several major lenders said they already wait at least this long before taking action.

RBS, which includes NatWest, said it was doubling the three-month period it currently offered to borrowers who fall behind with mortgage repayments.

It comes just days after the UK Government bought 58% of the bank’s shares for £15billion – effectively bringing it under state control.

Housing charity Shelter said it was an important step towards helping thousands of people to keep their homes.

Chief executive Adam Sampson said: “RBS has raised the bar for other lenders who must now follow suit to ensure that all homeowners benefit from the same protection.”

But Louise Cuming, head of mortgages at moneysupermarket.com, said: “I think this has been a fairly clever marketing ploy by RBS. It is all about spin.

“If you look at most lenders’ policies, it is very rare for them to start repossession proceedings before then. What we would like to see is more priority given to active dialogue with borrowers.”

Britain’s biggest mortgage lender Halifax said it was looking at the initiative, but added it already had a comprehensive programme in place for borrowers who got into financial difficulties.

Lloyds TSB said in general borrowers were at least six months in arrears before it began repossession action, adding that on average properties were not taken over until at least 12 months.

Barclays’ lending arm the Woolwich also said borrowers had to be several months in arrears before it acts.

Nationalised bank Northern Rock said on average homeowners were at least 15 months behind with payments before properties were repossessed, with less than 1% of these happening when people were less than six months in arrears.

The Council of Mortgage Lenders said it would not always be in borrowers’ best interests to have the process delayed by three months.

A spokesman said: “The general approach that we have always advocated is that lenders allow for individual differences in circumstances and don’t have a straight-jacket approach.”

When a property is repossessed by a lender it is sold and used to repay the outstanding mortgage debt. But if insufficient funds are raised by the sale, borrowers remain liable for the outstanding debt, with interest accruing.

In the current housing market, delaying repossession for three more months increases borrowers’ arrears while price falls mean their homes are also worth less.

Repossession levels are increasing in the face of the economic downturn and rising unemployment, with 11,300 people losing their homes during the third quarter of the year, 12% more than the previous three months.