Struggling NatWest borrowers have been given an extra six months to pay back unsecured loans and overdrafts.
The part state-owned bank said it has “not yet” seen “significant” increases in the number of defaults or people in arrears but said the measure is designed to act as a support to communities.
As a result of the extension, from early next month, NatWest customers who have missed several payments will have 24 months to repay, an increase from 18 months.
Government had urged banks to do more to support customers.
Chancellor Jeremy Hunt met major mortgage lenders last month to issue a warning and, subsequently, a range of forbearance measures were reported to have been agreed late in December.
Policies used during the financial crash are said to be among the tools being deployed to aid consumers struggling with debt, including moving mortgage holders to interest-only deals and moving them to fixed-rate deals, the Financial Times reported.
People earning least have been most impacted by inflation and more than a million of the bank’s 19 million customers now spend more than 10% of their income on fuel or more than 30% on groceries, or both, the lender said.
NatWest also said it was increasing to £5.7m its donations to charities and groups that provide debt advice and access
to affordable credit.
But the measure is less than the forbearance package offered during the pandemic when customers were offered payment holidays.
The taxpayer holds a 48.5% stake in NatWest after it was bailed out by the state during the global financial crash. It was only in June of this year that the state ceased to be the majority shareholder after it sold part of its shareholding.
The Bank of England has forecast “significant pressure” will be placed on the ability of households to meet their debts.
“The risk that indebted households will default on loans, or sharply reduce their spending, has increased,” the Bank’s latest Financial Stability Report said.
More than 1.4 million fixed-rate mortgage customers are facing significant hikes to monthly payments when deals end this year, according to the Office for National Statistics. It said 57% of fixed-rate mortgages coming up for renewal in 2023 were fixed at interest rates below 2%.
Consumers have been experiencing hardship as the UK has gone through double-digit inflation and recorded the second largest fall in real wage growth since records began, meaning an effective pay cut for workers.