FAMILIES in danger of losing their homes will be able to defer part of their mortgage repayments to give them “breathing space” through the recession, under a £1bn rescue package unveiled by Gordon Brown yesterday.
The Prime Minister vowed that no-one genuinely attempting to pay their mortgage need fear repossession, once the Homeowners Support Mortgage Scheme was in place early in the New Year.
Under an agreement struck with eight major banks – responsible for 70% of mortgages – the Government will underwrite up to 100% of interest payments owed to the lender for up to two years.
Currently, only benefit claimants with mortgages of up to £200,000 can get help – leaving two-income families where one partner loses their job at the mercy of a repossession order.
The new scheme will also cover workers suffering a “significant loss of income” – perhaps because of loss of overtime, or a switch to a lower-paid job – with a higher mortgage limit of £400,000. Only families with savings above £16,000 will be excluded.
Furthermore, although only interest payments can be deferred, No.10 said it expected lenders to consider requests to switch to interest-only mortgages – which would mean all payments would be covered.
The announcement came during debate on the Queen’s Speech in the Commons, although it is not expected to require legislation before it can get under way.
Instead, it represented a rabbit pulled dramatically out of the Prime Minister’s hat to grab the political initiative and help people through the recession.
Earlier, the Council of Mortgage Lenders (CML) warned ministers that repossessions were expected to soar to 75,000 next year – very close to the peak of 75,500 reached in 1991, during the last recession.
Yesterday, Mr Brown told MPs: “We will do everything in our power so that no hardworking family which demonstrates to their bank a willingness to pay should face the fear of repossession.
“Hardworking households that experience significant loss of income, as a result of the downturn will be able to defer a proportion of their interest payments for up to two years, while they get their finances back on track.”
The Prime Minister said “no country” was going so far to help recession-hit homeowners, hailing the deal as part of a new “Charter for Mortgage Holders”.
That charter also includes promises by some lenders not to start repossession proceedings for six months.
The eight lenders who have already signed up to the scheme are HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS and HSBC. More are expected to follow.
