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Royal Bank of Scotland (RBS) have stated that they will not start the house repossession process until customers are 6 months in arrears with their mortgage. This used to be 3 months. From our point of view it is clear that they are trying to help their customers to stop house repossession.
However sceptics say that this is simply a marketing ploy as Royal Bank of Scotland who own NatWest are only number 7 in the residential mortgage lending list at 5.7%. Still they are number 7, not number 27 and if its a marketing ploy that benefits some people who are facing house repossession then its still positive and may influence other bigger lenders such as Northern Rock and HBOS to follow suit.
RBS leaders in their field?
Well this announcement did come just days after the Government took a 58% slice of the bank with £20bn of capital raising agreed to. This helped put pressure on the bank to make this decision however it may be difficult for the Government to put pressure on other banks such as Lloyds TSB and HBOS who took up capital from private investors and Barclays from Middle Eastern investors. HSBC also found its own resources to top up capital. These banks look like they want to control their own ships.
HBOS – Stated they will look following suit but state they already have a “comprehensive programme in place for borrowers who get into difficulties.”
Northern Rock – Have been criticised for aggressive repossession of homes. The chief executive, Gary Hoffman admitted at a Treasury Select Committee that their “repossessions were above average”. However it must be noted that this is probably based on poor lending strategies (sometimes at 125% of the property value) than harsh repossession strategies. Northern Rock also have a high number of poor quality borrowers on their books when compared to other banks so repossessions will naturally be higher.
Normally it takes between 9 to 12 months from the first mortgage default to the borrowers from being evicted through the court process. However banks are tougher on buy to let mortgage owners as these parties do not lose their house and if tenanted maybe the tenants will be able to stay.
Some say that there is considerable pressure on the banks to start lending money again. The huge base rate cut to 3% has not been passed on and it is understood that both Barclays and HSBC are under pressure from the Government to these savings on.
RBS shares were at 53.80p at close of trading Friday 28 November and were at 54.90 close of trading Monday 1 December and as at midday Tuesday 2 December were trading at 58.00p.