Northern Rock 'too aggressive' with repossessions say charities

Friday, 17 October 2008 12:12

Northern Rock has been accused of being too aggressive in pursuing people who are struggling to pay their mortgage.

It has been reported the bank is 2.5 times more likely to repossess a home as other banks.

In the first six months of the year 3,710 properties were repossessed by Northern Rock -the equivilant of 0.56 per of the bank's of stock. Industry repossession averages stand at 0.16 per cent, according to Shelter.

The charity Credit Action said Northern Rock must be more flexible to help people who are having difficulty making payments on their mortgage.

Director Chris Tapp said: "They are also not giving people a lot of time, they seem to be moving for repossession quite quickly as a resort."

Charities say the bank, which was nationalised after a bank run last year forced the government to take action, is so keen to repay its debt to the taxpayer it is forcing people out of their homes.

Shelter chief executive Adam Sampson said: "There is no doubt the government has inherited some of the riskiest mortgages through the newly nationalised banks and building societies.

"However, it seems a bit perverse that ministers who a few months ago were lecturing lenders about their responsibility towards homeowners in arrears are now allowing companies that are state owned to repossess peoples' homes so aggressively.

"It is ironic if ministers were now presiding over some of the most aggressive repossession policy in the market."

Spokesperson Frances Walker from the Consumer Credit Counselling Service said: "Our concern is in particular that when they have existing customers who have come to the end of their fixed rate, their mortgage is unaffordable.

"When they look around, they find they can't go elsewhere because Northern Rock was lending to people with low incomes.

"We would like to them to have a more flexible approach to existing customers."

A spokesperson from Northern Rock denied the bank is taking an aggressive stance toward repossessions.

"It is clearly in the best interests of both the customer and Northern Rock to come to an agreement that results in any customer who has fallen into arrears continuing to make repayments and for them to remain in their home. That is our objective.

"Our debt management teams try to achieve these ends with customers wherever possible.

"However, in certain circumstances where a reasonable agreement cannot be reached with a customer and arrears are accumulating at significant levels, it may not be in the best interests of the customer or the company to forebear and repossession becomes the only option available. But repossession remains the last resort," Northern Rock said.

Northern Rock - as it tries to pay back its loan to the government - is encouraging borrowers to remortgage with other borrowers. This leaves the bank with those customers with poor credit records or low equity behind them as house prices fall that cannot remortgage elsewhere - and so are more likely to be a repossession risk.

The Council of Mortgage Lenders (CML) maintains its prediction that a total of around 45,000 properties being taken into possession this year, despite the recent banking crisis.

Out of the whole market of 11.7 million mortgages, this represents a repossession rate of around 0.38 per cent.

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