Royal Bank of Scotland doubles repossessions 'breathing space' for struggling homeowners » Housing » 24dash.com

Royal Bank of Scotland announced today that it would give struggling homeowners at least six months before launching repossession action.

The NatWest parent said it was doubling the three-month breathing space currently offered to borrowers who fall behind with mortgage repayments.

News of the move comes days after the Government bought 58% of the bank's shares for £15 billion - effectively bringing it under state control.

Stephen Hester, chief executive of the Royal Bank of Scotland, wrote in the Financial Times today that the bank was "conscious that many people face anxiety" about repayments in the tough economic climate.

He said: "In our UK residential mortgage lending, and as a banker to small businesses, we are determined to serve customers well in the difficult times ahead and have commitments to Government that we intend to meet in letter and spirit."

It is expected that other banks may also follow suit as the Government calls for greater help from banks for cash-strapped borrowers and businesses.

MPs are also reportedly working on plans for statutory codes of practice in the banking industry, which could replace the current voluntary system.

The move by RBS comes amid pressure from Chancellor Alistair Darling to ensure banks do more to help households in the current economic downturn.

RBS has already announced that it will guarantee overdraft rates and contracts for its business customers for at least a year. It will also return to "normal" lending levels, as part of the Government's recapitalisation package for the banking sector.

Mr Darling told the Observer yesterday: "You know they are getting something from the Government. They have to realise that the taxpayer's going to get something in return."

RBS and NatWest have about 7% of the mortgage market, smaller than rivals such as Lloyds TSB and Halifax Bank of Scotland.

Leslie Morphy, chief executive of Crisis, the national charity for single homeless people, described the move as a welcome first step.

She said: "With 45,000 households predicted by the Council of Mortgage Lenders to be repossessed by the end of this year, it is critical that banks demonstrate greater understanding and leniency towards struggling mortgage holders.

"The six months grace period will provide a lifeline for those facing the prospect of repossession and appears to go further than recent Government proposals.

"We urge other mortgage lenders to follow this lead and do everything in their power to prevent those in financial difficulties from experiencing the trauma of homelessness."

Grant Shapps, Conservative Shadow Housing Minister, said: "We strongly welcome this practical step to help prevent hard working families from having their homes repossessed.

“This new initiative comes just one week after we warned that the government's own limited three month moratorium was unlikely to help because no repossessions actually occur during the initial three months period.

“We encourage other lenders to now follow this lead."