RBS under fire over crofthouse mortgages

The RBS Group is facing calls for a policy U-turn after it emerged that the tax-payer funded bank no longer grants mortgages on croft houses.

It is feared that the bank’s stance is based on what appears to be a misunderstanding of the legislation and rules surrounding the Croft House Grant Scheme.

Under the CHGS, applicants are awarded a one-off lump sum — as much as £30,000 — towards the construction of a house on their croft, with stipulations that they work the land accordingly. The remainder of the building costs is normally secured through a mortgage.

However, it has emerged that among the main lenders who will not entertain a self-build option under the CHGS is the RBS, which was famously the subject of a tax-payer bail-out.

An RBS spokesperson said: “RBS is committed to being a responsible lender and we need to make sure we obtain full repayment of any mortgage borrowing. We do not offer mortgages on a self-build or remortgage basis where a crofting grant is involved, as our standard security would effectively rank in second place, which is outside our policy.”

However, that appears to be a misunderstanding of the position as the Scottish Government — who run the CHGS — have already made it clear that they would have no interest in taking over a property in the event of default, leaving the field open for the bank.

It is also understood that part of the reluctance on the bank’s behalf is that a croft can only to be taken over with the approval of the Crofting Commission, which they believe makes re-sale more difficult.
Murdo MacLennan, the Western Isles Crofting Commissioner, said: “It is an affront to RBS frontline staff and their mortgage advisors in the Highlands and Islands that they would find explaining lending to crofters ‘extremely complex’. It is clear that the media relations department of the RBS have no knowledge of what the legal status of a decrofted house site is and the security provided to the lender.
“I am currently seeking a meeting with the appropriate individuals dealing with RBS lending policy in the crofting counties.”

RBS refuse croft house mortgages