Banks face further scrutiny of their lending levels and practices after the Chancellor outlined a string of measures designed to ease the strain on cash-strapped borrowers.
Alistair Darling announced a new banking trade body called the Lending Panel to monitor loans to households and businesses. The panel will include representatives from the Government, lenders, industry organisations, regulators and the Bank of England to monitor banks' behaviour.
To support stressed homeowners, the panel will monitor the market, encourage support of struggling borrowers and push for alternatives to repossession. Mr Darling said major lenders had agreed to wait at least three months after a borrower falls into arrears before seeking repossession. Banks and building societies had also agreed to be more flexible about accepting minimum payments.
The Chancellor also announced more than £15m of new funding for free debt advice, with £5.85m going to telephone debt lines and £10m of extra funding for Citizens Advice Bureaux. He also announced further government support for struggling homeowners. The Support for Mortgage Interest scheme, which covers mortgage interest payments for those who have lost their jobs, will cover mortgages up to £200,000 – up from £100,000. The level of interest rates covered by the scheme will stay at just over 6 per cent for six months.
Mr Darling extended the Mortgage Rescue Scheme, set up in September, to cover those at risk as a result of taking out second mortgages.
But Roger Bootle, an economic adviser to Deloitte, said: "The key to the economic environment is going to be the behaviour of the banks. The Chancellor may well have to take more effective control of them to ensure that they carry on lending."Reuse content