Banks pressed to go easy on arrears

Pressure was today mounting on Royal Bank of Scotland's competitors to follow its pledge to give homeowners at least six months' grace on their mortgage payments before it starts repossession action.

NatWest owner RBS is now majority owned by the taxpayer, and is the country's fifth largest mortgage lender with a 7% market share.

Chief executive Stephen Hester said today's decision had been made on commercial grounds but added: "In our UK residential mortgage lending, and as a banker to small businesses, we are determined to serve customers well, and have made commitments to Government that we intend to meet in letter and spirit."

But rival bankers questioned whether Hester's "commitments" had been made voluntarily or under pressure from Government. Chancellor Alistair Darling has made it clear he expects the banks - particularly part-nationalised ones - to do more for their customers as the economy spirals down. He said: "You know they are getting something from the Government. They have to realise that the taxpayer is going to get something in return."

HBOS, which is being taken over by Lloyds TSB and will be minority owned by the taxpayer after a £17 billion bailout, said: "We will look at the RBS initiative but we already have in place a very comprehensive programme for borrowers who are in financial difficulties."

Analysts pointed out that RBS is barely in the buy-to-let mortgage market, where many of the current repossessions are taking place.

RBS said its pledge would apply to both its own and NatWest's customers, would cover people who are already in arrears and will remain in force at least for 2009. It added that it would let customers take independent legal advice before it launched repossession proceedings.