Administrative cock-up or tip of iceberg?

UK banks are in a bit of a Prisoners' Dilemma: acting individually, it is in every bank's interest to foreclose on every mortgage loan that looks in the slightest bit risky as soon as possible, because there is an advantage to being the first to bail out. However, this will merely speed up the house price crash. Acting as a cartel therefore, it is in the banks' collective interest to hang on as long as possible.*

Whether RBS NatWest will decide that this is a PR disaster and hastily back track remains to be seen...

The Addymans have been threatened with repossession, even though they've never missed a payment on their mortgage. Peter and Marian Addyman say NatWest gave them a week to repay the £226,000 loan or face losing their home, and the deadline has expired. The ultimatum - for which they say they have been given no explanation - comes despite the bank's nationalised parent company, Royal Bank of Scotland pledging not to carry out any repossessions for six months...

Mr Addyman, a 32-year-old pharmacist, and his wife, who works for a mental health unit, have three sons. They bought their newly-built five-bedroom home in St Leonards-on-Sea, East Sussex, for £250,000 in 2004. About two years ago they consolidated their debts by taking out a second mortgage for £100,000 with a finance company, but insist they were entirely open with NatWest about this.

... NatWest wrote to them in September to say that after 'reviewing' their arrangement it was withdrawing the mortgage. They had 30 days in which to secure a new loan or it would begin recovery action and inform credit rating agencies of the debt. The letter concluded: 'We assure you that we have only reached this decision after careful consideration. However our decision is final and we are not prepared to enter into any discussion in relation to it.'

The couple tried to make alternative arrangements, but say the fall in property prices has left them unable to find a new mortgage deal.

* All cartels face a similar problem, for example for oil-producers, there is a collective advantage to restricting supply to keep prices up, but an individual advantage to breaching a quota to exploit the artificially high prices.