The country went into lockdown, and the mortgage payments went on hold. Italy’s deputy economy minister, Laura Castelli, said repayments on residential mortgages would be suspended across the whole of Italy. It happened the same Tuesday that British banks began announcing their own breathing space for customers hit by the coronavirus.
The Royal Bank of Scotland, which was owned by the taxpayer, said people hit by the outbreak could put off mortgage and loan payments for as long as three months. TSB and Lloyds followed with a mortgage window of their own. Savers were told they could close fixed-term accounts without a charge, so that anyone short of cash could reach it.
What the banks offered
Help went beyond mortgages. Customers could apply for a temporarily higher credit card limit or ask to raise their cash withdrawal limit, by up to £500. RBS also promised to refund fees on credit card cash advances. For business customers, Lloyds put £2bn of fee-free finance on the table for firms with revenues under £25mln. Barclays offered 12-month capital repayment holidays to small and medium-sized companies with existing loans above £25,000. A day earlier RBS had set aside £5bn for emergency loans and dropped borrowing fees for small firms feeling the strain.
Each case was to be judged individually, and the length of a mortgage holiday could differ from one bank to the next. “We understand that there may be circumstances where a personal customer may fall into financial difficulty as a result of the impacts of coronavirus, for instance, loss of income,” an RBS spokesman said.
An unusual step for lenders
UK Finance, which speaks for the major banks, said all of them would consider raising overdrafts or allowing repayment relief on loans and mortgages. “We would encourage customers who think they may be affected to contact their provider as soon as possible to discuss the support available,” was the message from chief executive Stephen Jones.
The BBC’s business coverage pointed out how odd the offer was. Letting personal customers stop paying a mortgage for three months is, in its words, inherently un-commercial. Do it without the bank’s agreement and a credit record takes serious damage. Switching capital repayment loans to interest-only for up to a year costs banks money as well. The open question was how a lender would establish that a customer was truly affected by the virus and not by something else. A doctor’s letter, perhaps. No bank had answered. Customers were advised to get any arrangement in writing, confirming that it would not harm their credit records.
Analysts quoted at the time noted that Italy has a relatively small share of homeowners with mortgages compared with the UK. In Europe, only six countries have a larger share of homeowners paying mortgages than Britain.
Sources
- Coronavirus: Banks to allow customers to defer mortgage payments – BBC News
- Coronavirus: Lloyds, RBS and Barclays ease rules to help Covid-hit customers | The Market Reporter
