Northern Rock holds back on repossession for six months
Northern Rock is to follow the lead established earlier this week by Royal Bank of Scotland and not begin repossession proceedings until mortgage borrowers are six months or more in arrears with repayments.
The nationalised lender has come in for criticism over its repossession policy.
In October, debt charity Credit Action claimed that the bank’s level of repossessions was twice that of its rivals and last month the lender was again accused of being aggressive towards homeowners in financial difficulty, with predictions that it would be responsible for 10% of all repossessions during 2008.
In terms of mortgage arrears, the bank has been compromised by its “Together Loans”, which prior to its collapse last September and subsequent rescue by the Government, allowed a maximum loan-to-value ratio of 125%.
In November Northern Rock revealed that the loans represent around 30% of its mortgage book but accounted for 50% of arrears and around 75% of repossessions.
However, the bank has pointed out that it has always been prepared to work with customers falling behind with repayments, stating that in the vast majority of cases where repossession takes place, negotiations have been underway for well over six months.
According to the Council of Mortgage Lenders, repossessions by all mortgage lenders rose 12% during the three months to the end of September, compared to the previous quarter, to 11,300.