Nationalised bank Northern Rock pledged to wait at least six months before repossessing the homes of borrowers who had fallen behind with their mortgage.
Northern Rock said as part of its ongoing commitment to work with customers who were facing repayment problems, it would formalise its policy of not taking repossession action for at least six months.
The Which? guides to mortgage arrears and repossession and how to deal with debt can help if you’re experiencing financial difficulties.
Repossession is already a last resort
Northern Rock said its existing debt management process involved working with each customer who was facing problems to try to agree an alternative debt management solution, with repossession a last resort.
Northern Rock said in cases where it did take over people’s homes, it had worked with customers for an average of 15 months from when they first got into arrears.
Northern Rock added that fewer than 1% of repossessions currently took place after less than six months from when the borrower first fell behind with their mortgage.
Royal Bank of Scotland, in which the government now holds a majority stake, announced on Monday that it would give struggling homeowners at least six months breathing space before it launched repossession action.
A marketing ploy creating deeper debts for borrowers
But while the move was welcomed by housing charities, commentators dismissed it as being little more than a ‘marketing ploy’
It was also warned it would not always be in borrowers’ best interests to delay proceedings for an additional three months, as arrears would continue to accumulate during this period, while the value of the borrower’s home would be falling.
Government plans voluntary code on repossessions
A number of major lenders say they already wait for at least six month before beginning repossession action but despite this, other banks are now likely to come under government pressure to give struggling homeowners more time before they repossess their homes.
The government is also understood to be preparing to announce that banks will be made to treat customers fairly under plans to make the current voluntary code of practice legally binding.
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