Hi °C | Lo °C Royal Bank of Scotland announced yesterday that it would give struggling homeowners at least six months before launching repossession action.
The Ulster Bank parent said it was doubling the three-month breathing space currently recommended under industry guidelines for borrowers who fall behind with mortgage repayments.
News of the move comes days after the Government bought 58% of the bank's shares for £15bn — effectively bringing the lender 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.
“We need to cut costs, to reduce our own borrowing and reduce some of our lending, too.
“But along the way we need to recognise our customers’ needs and fulfil them where we can. Not because of any moral pressure, although we understand it, but because it makes commercial sense.”
A spokesman for Ulster Bank confirmed that its customers would benefit from the RBS move in precisely the same way as RBS and NatWest customers.
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.
