Source : Business Times - 2 Dec 2008
Mortgage lenders told that arrears policies must match FSA requirements
British lender Royal Bank of Scotland (RBS) yesterday said that it would not repossess the homes of mortgage customers who default until six months after they first fall into arrears.
RBS, owner of NatWest bank, said that the move was designed to give overstretched borrowers a chance to resolve their financial problems as falling house prices and a flagging economy put households under pressure.
‘We fully understand that one of the biggest worries facing homeowners in financial difficulty is the thought of losing their home, and this is especially true given the current economic climate,’ RBS managing director of retail banking Craig Donaldson said in a statement.
The UK’s biggest mortgage lenders have already committed to waiting three months before repossessing customers’ homes, under an agreement announced by British Finance Minister Alistair Darling last week.
Mortgage arrears and repossessions have risen sharply this year, reflecting the economic slowdown as well as a sharp rise in borrowing costs in the wake of the credit crunch.
The Council of Mortgage Lenders said that there were 168,000 households in arrears at end-September, up 8 per cent from end-June.
A total 11,300 homes were repossessed in the three months to Sept 30, an increase of 12 per cent on the previous quarter.
RBS’ move could force rival lenders to follow suit, potentially delaying the moment when the UK house price slump bottoms out, said Evolution Securities analyst Bruce Packard.
‘This announcement does put pressure on the other banks, notably Lloyds and HBOS, which together have £348 billion (S$810 billion) of mortgages. The announcement may also delay when the UK housing market reaches a ‘clearing price’,’ Mr Packard wrote in a note to clients.
RBS said that its six-month grace period would remain in place until ‘at least’ the end of 2009, and that it would also ensure that customers in arrears were given the opportunity to get independent advice.
RBS is 58 per cent owned by the British state after shareholders mostly shunned an equity fund raising underwritten by the government last month.
The UK government, which has spent a total of £37 billion of public money in bailing out RBS, Lloyds TSB and HBOS, has been urging banks to keep lending to consumers and businesses in a bid to bolster the flagging economy.
Last Friday, the Financial Services Authority (FSA) wrote to the heads of Britain’s leading mortgage lenders, asking them to make sure that their arrears polices are in line with FSA requirements, which stipulate that repossession should only be used as a last resort.
House prices in Britain have declined sharply during the credit crisis. In the latest data from the housing market, property consultancy Hometrack said yesterday that prices in England and Wales fell by 1.1 per cent in November to take them 8.1 per cent lower on a year ago.
No comments:
Post a Comment