It will come as some relief to embattled home owners that the Royal Bank of Scotland and its subsidiary NatWest have pledged not to commence repossession proceedings for six months after mortgage customers first fall into arrears.
But this can only be a temporary stay of eviction for many as employment prospects decrease and, as the Council of Mortgage Lenders has conceded, repossessions and arrears problems could last for years as home owners struggle to recover from mounting debts.
The CML expects the number of repossessions to rise by 15% this year to 53,000 and believes that repayment problems could last long after the recession. It says the number of borrowers in arrears will rise to 205,000 this year, from 188,000 and it expects to see a slow recovery from payment problems.
We know that payment problems, triggered typically by unemployment, can lag well behind a recession. Household finances will also come under greater pressure when interest rates rise.
While RBS’ announcement is welcome it should be seen against a background of broken promises. A joint report by Citizens Advice, Shelter and Advice UK at the end of last year revealed that lenders were not following the pre-action protocol designed to help people avoid repossession.
Judges verified they had done so in only a handful of cases.
Brokers should not rely on lenders’ largesse to protect their clients’ investment but rather point them towards mortgage payment protection insurance.