Britannia Radio

The Times

December 23, 2008

RBS case highlights repossession threat even when mortgage repayments have been paid

James Charles

Homeowners who have not missed a single mortgage payment could still be threatened with repossession by lenders who use an emergency clause to demand that the entire loan is repaid at short notice.

Peter and Marian Addyman, who live in St Leonards, East Sussex, received a letter this month from NatWest – part of the Royal Bank of Scotland, which is majority-owned by the Government – insisting that they repay a £226,000 mortgage within 30 days or face repossession.

The couple, who have never failed to make a mortgage repayment, bought their new-build five-bedroom property for £250,000 in 2004. When their initial mortgage deal expired at the beginning of the year, they took out an interest-only tracker loan at 0.04 per cent above the Bank of England base rate.

Their local MP, Michael Foster, who has twice written to the bank to request an explanation, said of the mortgage: “The bank are obviously not making any money out of it but they agreed it.”

RELATED LINKS

• Straw orders inquiry into repossessions

• Repossessions jump 71% as arrears grow

The Council of Mortgage Lenders said that the clause allowing lenders to demand that a mortgage be repaid at short notice existed in the small print of almost every mortgage in Britain, although it was meant to cover only exceptional circumstances. This month a judge supported the right of lenders to repossess properties at will under a law dating back to 1925.

NatWest has refused to explain why the mortgage is being withdrawn. The case is being investigated by the Financial Ombudsman Service.

• HAVE YOUR SAY

Its about time that the banks were nationalised and ALL directors & senior manager fired.

Michael Sims, London, United Kingdom

Then we can look forward to an increase in homelessness, a large increase. How many people live in a buy to rent accommodation ? The sense in this is, the bank makes it's money from loans by means of interest. The bank is a business, a corporation; these people do not do compassion and integrity.

Y.Fraser, Stirling, Stirlingshire

Another paper has more of this story - they allegedly have a second £100k consolidated loan secured against this property. With an interest only mortgage and falling house prices, the property no longer covers the debt. 

So the bank appears to be reacting correctly to a toxic mortgage situation.