HM Treasury

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10 December 2008

The Homeowner Mortgage Support Scheme

The Government today announced further details of the Homeowner Mortgage Support Scheme, intended to provide greater assurance to homeowners that they will be able to remain in their homes if they suffer a temporary fall in income, but are expected to recover at a later date.

The new scheme will provide a bridge, giving homeowners who are experiencing financial problems sufficient time to find new employment or recover income, without the added concern and stress of potentially losing their home in the interim. 

This complements our current framework of support, including the Support for Mortgage Interest (SMI) scheme, which is aimed primarily at households where no one is in work.

The scheme will allow lenders to reduce a borrower’s current monthly mortgage payments, with the deferred payments rolled up, added to the principal, and paid at a later date when the borrower’s financial circumstances have improved. The Government will guarantee the lender against a proportion of any loss incurred on the deferred interest payments in case the borrower defaults.

The scheme will be voluntary and subject to eligibility criteria to ensure that there is proper risk sharing between Government, lenders and borrowers and the scheme is sustainable for those that participate.  To qualify, borrowers will:

The scheme itself will be open for a window of two years, subject to review. The guarantee will last for a maximum time period and will expire once the customer is able to commence normal payments. If, during the period of guarantee, the customer defaults, the Government will pay the lender the equivalent sum of the total amount of the interest guaranteed that is not recoverable from equity in the property.

The Department for Communities and Local Government and HM Treasury continue to work closely with industry and consumer groups on some of the practical aspects of implementation. 

Notes for Editors

1.       The Homeowner Mortgage Support Scheme was announced on 3 December and is one of a number of measures the Government has announced

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

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

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

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