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03 December 2008

New scheme to help people at risk of repossession

The Government today announced a new scheme to help people who suffer a temporary loss of income stay in their home.

The new Homeowner Mortgage Support Scheme will enable households that experience a significant and temporary loss of income as a result of the economic downturn to defer a proportion of the interest payments on their mortgage for up to two years. The Government will guarantee the deferred interests payments in return for banks’ participation in the scheme.

The Government will work with lenders over the coming days to develop the scheme in detail, with a view to it being available to customers early in the New Year. The country’s eight largest banks have already pledged that they will work with the Government to develop the scheme.

The Chancellor said: 

“This is real help for homeowners at risk of repossession through no fault of their own. The scheme will give people who face a temporary fall in their income the confidence that they need to rearrange their finances so they can come through a difficult period without losing their home.”

Housing Minister Margaret Beckett said:

“We are determined to do everything possible to ensure that hard working households have the option to stay in their homes, if they suffer a loss of income during the downturn. This scheme will give households the breathing space to get back on their feet again and help ensure they do not face or fear repossession. It shares the risk of home ownership at this difficult time across all the partners - the Government, the lenders and the borrowers. We want to see all lenders signing up to this scheme as part of their efforts to ensure that repossession is always an absolute last resort.”

Notes for editors

1. Homeowners Support Mortgage Scheme is one of number of measures the Government is putting in place to help prevent repossessions.

2. The 8 largest lenders covering 70% of the mortgage market  – HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS, HSBC – have agreed to support the new scheme. 

3. The deferred payment will be rolled up and added to the principle, with the borrower paying this off when their financial circumstances improve, maintaining an affordable monthly payment by extending the term of the mortgage.

4.  The Government will guarantee lenders against the loss of deferred interest payments.

5.  This scheme is in addition to recent measures announced in the PBR to help homeowners which include:

6. This follows action Government has taken to support households in recent months, including:

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