RBS borrowers allowed six months to sort out mortgage arrears

RBS, which last week completed a fundraising that left the taxpayer as majority owner of the bank, has pledged to allow homeowners in financial difficulties more time to sort out their mortgage arrears.

Borrowers with RBS or its NatWest subsidiary will not face repossession proceeding until they are six months in arrears with repayments, rather than the customary three months.

The move should go some way towards easing the tension between the Government and the UK’s leading banks, particularly if RBS’s competitors follow suit.

Only last week, the Financial Services Authority wrote to the chief executives of the UK’s leading mortgage lenders insisting that they review their policies on arrears to ensure they are treating customers fairly.

Meanwhile, repossessions continue to rise, with figures from the Council of Mortgage Lenders showing a 12% increase in the third quarter of 2008, to 11,300, compared with the second quarter of the year.

Mortgage arrears also increased: in the three months to the end of September, 168,000 homeowners were three months or more in arrears, an 8% rise on the previous quarter.

RBS is the UK’s fifth largest mortgage lender with a 7% market share and its commitment to extend further help to homeowners is probably as shrewd as it is altruistic.

UK house prices continue to fall on a monthly basis and the bank’s balance sheet may benefit from homeowners who continue to pay their mortgages, even belatedly.

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