By Chris Brooke and Becky Barrow
Now banks ring up their cash-strapped customers to warn them: ‘Ditch mobiles and gym membership or lose your home’
Cash-strapped homeowners are being telephoned by their banks and told to cut spending on ‘luxuries’ – or risk losing their homes.
Every week, around 2,000 customers of Northern Rock Asset Management and Bradford & Bingley are being warned to slash their outlay on mobile phones, gym memberships and even socialising, to ‘prioritise’ their mortgages.
In an extraordinary admission, the taxpayer-owned banks said that for the first time they were doing secret credit checks to identify high-risk customers.
They expect to call 30,000 in total. Although it is standard for a credit check to be done when a loan is taken out, it is unprecedented for so many to be carried out after mortgages have been approved.
And while some would argue the action is a sensible precaution, others will condemn it as patronising and unfairly singling people out.
Other banks and lenders are now likely to launch their own copycat moves.
UK Asset Resolution is the company set up to run Northern Rock Asset Management and Bradford & Bingley, which were both rescued by the Government. The company has 616,000 mortgage customers and owes £47billion to the taxpayer.
It confirmed it was identifying customers who may be struggling with other debts.
For example, it is using the credit checks to discover those who are falling behind with credit card payments or have stopped paying back a personal loan or their mobile phone bill.
Richard Banks, chief executive of UK Asset Resolution, said: ‘Some people won’t cope when interest rates rise, but for others there are remedies. They need to think about what is their most important debt.
‘It is not their credit card or renewing their Sky subscription, or going out for the latest mobile technology. It is their mortgage.’
Mr Banks, a former director of Alliance & Leicester, said: ‘We want customers to look at their finances and change their behaviour.’
Almost 20,000 families had their homes repossessed in the first half of the year because they failed to make their mortgage payments.
The latest figures from the Council of Mortgage Lenders show there were 18,100 repossessions between January and June.
Last night Melanie Bien, of the independent mortgage broker Private Finance, said: ‘It is unprecedented. I’ve never heard of banks doing credit checks mid-way through a mortgage deal before.