Government announces new support for homeowners

Published 22nd Apr 2009

A long-awaited Government plan to allow homeowners to defer interest payments for up to two years is unveiled
James Charles

A much-delayed scheme to help homeowners who suffer a sharp fall in income has been launched by the Government today without the support of the majority of mortgage lenders.

Five banks and one building society have signed up to the Homeowner Mortgage Support Scheme (HMS), which was first announced last December. Abbey, the second biggest mortgage lender, Barclays and Nationwide, the UK's biggest mutual, have refused to take part.

The scheme, which is open to borrowers with a mortgage up to £400,000, will allow homeowners who lose their jobs or face a drop in income the chance to defer 70 per cent of monthly mortgage interest payments for up to two years. The interest would be rolled up into the total debt and repaid at a later date.

Homeowners who have more than £16,000 in savings or who bought their homes after December 1 last year will not qualify for the scheme.


The Government is offering to guarantee any losses to the lender if a borrower cannot afford to begin repaying his or her mortgage in full after the two year period and is eventually repossessed.

Four of the five banks which are participating in the scheme, including the Lloyds Banking Group (represented on the high street by Lloyds TSB and Halifax) and Royal Bank of Scotland, are taxpayer controlled. Cumberland Building Society is the only mutual to sign up. The other participants are Clydesdale and Yorkshire, owned by the National Australia Bank Group. The banks and building society represent 80 per cent of the mortgage market.

The Council of Mortgage Lenders insisted that banks which were not participating in the scheme would still be helping homeowners who were struggling to meet their mortgage payments. The Building Societies Association also argued that its members already extended support to homeowners which was equal or better than the provisions made in the HMS.

Michael Coogan, the director general of the CML, said: "Lenders fully recognise their responsibility to keep people in their homes where repossession can be avoided. The fact that some lenders are utilising the new scheme and others are not indicates simply a difference in their approach to forbearance, not in their commitment to it."

The long-awaited plan to help homeowners in trouble has been dogged by problems since it was first announced by Gordon Brown in December and it is estimated that 28,000 borrowers have been repossessed in the time it has taken the Government to finalise the details of the hastily-thought up plan.

Critics have accused the Government of failing to consult lenders before the proposals were released, while last month lenders were given less than a week to read the 200-page final document before the deadline to sign up. A number of lenders, include those with a large number of sub-prime borrowers, are still negoitating with the Government.

Margaret Beckett, the Housing Minister, said: “On top of the range of measures we’ve already put in place, this new support will help borrowers who just need a bit more time to get themselves back on their feet.

“The clear message to borrowers is to contact your lender straight away if you’re concerned about how to pay the mortgage as often a solution can be found.”

Source: ' Times '

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