Repossession move 'marketing ploy'
Updated on 01 December 2008
Royal Bank of Scotland announced it would give struggling homeowners at least six months breathing space before it launched repossession action.
But while the move was welcomed by housing charities, commentators dismissed it as a "marketing ploy". Several lenders also said they already waited at least this long before taking action, while it was also warned it would not always be in borrowers' best interests to delay proceedings for an additional three months.
RBS, which includes NatWest, said it was doubling the three-month period it currently offered to borrowers who fall behind with mortgage repayments. The move comes just days after the Government bought 58% of the bank's shares for £15 billion - effectively bringing it under state control.
Housing charity Shelter welcomed the move, saying it was a step towards helping thousands of people to keep their homes. Shelter 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 from repossession."
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."
She said many lenders did not have an in-house capability to deal with people who were in arrears, instead outsourcing it and charging customers for it. But she added that from a borrower's point of view, the publicity surrounding the move may make people who were in difficulties talk to their lender sooner.
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 after payments were first missed.
The Council of Mortgage Lenders also pointed out that it would not always be in borrowers' best interests to have the process delayed by three months. 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 through the sale of the home, borrowers remain liable for the outstanding debt, with interest accruing on it.
A CML 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."
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