Page last updated at 11:00 GMT, Monday, 1 December 2008

RBS offers to delay repossessions

Royal Bank of Scotland branch

The Royal Bank of Scotland (RBS) has guaranteed not to repossess the properties of customers who fall behind on payments for at least six months.

The bank, which owns NatWest, is Britain's fifth largest mortgage lender with a 7% market share.

The government has bought a 58% stake in RBS as part of its recapitalisation plan for the banking sector.

The announcement will put pressure on the biggest mortgage lender, HBOS, which has also taken taxpayer cash.

RBS also said it would make sure customers had the opportunity to seek independent advice before starting any legal action.

"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 news was welcomed by Citizens Advice and also the charity Crisis, which represent homeowners struggling with arrears.

Last week, Treasury minister Ian Pearson said he would hold all banks' "feet to the fire" to ensure customers were treated fairly.

Figures released by the Bank of England, after the RBS announcement had been made, showed that mortgage approvals dropped again in October - with just 32,000 mortgages approved, 1,000 fewer than in the previous month.

'Savage deflation'

The BBC's business editor Robert Peston said: "Here's the positive side of what Royal Bank has done: it gives those who lose their jobs in the looming wave of redundancies a better chance of getting a new source of income in time to prevent the bank seizing the family property.

"But there is a cost, which will fall on estate agents and - possibly - anyone interested in seeing an end to the savage deflation of house prices."


Our correspondent said the disposal of repossessed property has become a vital source of income for many estate agents, at a time when property sales have collapsed by well over half and many agents are on the verge of collapse.

He added: "You may not weep for them, though you only have to look at your own High Street to recognise quite how many thousands are employed by them - there are 10,000 members of the National Association of Estate Agents, so numbers on their payroll is a multiple of that."

'Normal lending practices'

RBS' decision may not be entirely down to government pressure, observers say.

"At a time when house prices are falling, banks don't really want to do repossessions because all they end up with is no money coming in from the mortgage loan and they end up with a stock of houses, which they probably can't sell," said Jonathan Charley from the consultants EDS.

"So, for most banks they'd rather avoid having repossessions and actually just get some form of money coming in from people."

RBS shareholders voted to take the government money at a meeting last week.

Among the conditions attached to the deal, the bank has lost freedom in areas such as executive pay and dividend policy.

RBS also had to agree to return to "normal" lending practices, and has already announced it will guarantee overdraft rates and contracts for its business customers for at least a year.

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