Money News: HSBC to get tough with customers who break the limit

High-street banking giant HSBC is to clamp down on customers who go heavily and repeatedly into the red.

Concerned about people who regard their overdraft as "an extension of their salary" rather than as a safety net, it is to introduce an annual review from 1 December.

The bank will contact all customers who have an overdraft, to check if they are having difficulty with the repayments and to gauge whether an overdraft is still the most suitable form of borrowing. Those who regularly breach their overdraft could see their limits cut.

The changes are designed to bring "greater clarity on what an overdraft service is, how customers apply for one and how fees are charged", said Joe Garner, HSBC's head of personal financial services.

In August, HSBC revealed a rise of more than a third in bad-debt write-offs, seriously hitting profits.

Its move comes just days after the Office of Fair Trading announced an inquiry into the size of bank charges imposed on customers who exceed their overdraft limits.

This probe was launched as the watchdog wound up a separate investigation into penalties for late payment of credit card bills. Providers have now cut these charges to £12.

Stuart Glendinning from price-comparison service Moneysupermarket.com said there could be a "pre-emptive element" in HSBC's move, since overdraft charges are expected to be cut. But it was more likely, he said, that HSBC was acting to reduce its exposure to customer bad debts.

NatWest, Lloyds TSB and Smile have all raised their overdraft rates recently.

Mortgages and loans: Repayment woe begins at home

An estimated 770,000 UK homeowners have missed at least one mortgage payment in the past 12 months, according to Citizens Advice.

In a survey of 2,000 home loan borrowers, the debt charity found that 4 per cent had missed one or more repayments. This figure was extrapolated to provide the national calculation.

For young borrowers saddled with student loans and credit card debt, the figure rose to 13 per cent, said Citizens Advice.

Last year, the charity helped to deal with 1.25 million debt problems and received 51,000 enquiries about arrears on mortgages and secured loans.

"Missing payments on mortgages or loans could possibly lead to repossessions," said David Harker, chief executive of Citizens Advice.

Meanwhile, figures from the Council of Mortgage Lenders (CML) show that spiralling house prices have forced first-time buyers to borrow a record 3.24 times average income to get on the property ladder.

This figure for July was up from 3.21 times the average income in June, and 3.06 times in the same month last year.