The new homeowner mortgage support scheme seems another example of the Chancellor Alastair Darling’s habit of announcing policy without thinking through the implications.

Prime Minister Gordon Brown first announced the scheme on December 3 and the Chancellor followed up with more details in his Pre-Budget Report.

Now, the Government seems to have cobbled together a policy that sounds great but will help virtually no one because the criteria for the scheme are so tight few homeowners will qualify and even if they do, mortgage lenders are not bound to give them, a mortgage holiday.

Experts believe about 9,000 homeowners may qualify for a mortgage break – while the City fears 75,000 will have their homes repossessed.

Despite the regular announcements about how the scheme may work, no one knows when it will start, who will act as independent advisors or whether the banks and building societies will actually operate the scheme.

The Treasury says some of the practical details were still being worked out.

The advantage of the new scheme for anyone eligible is that they will be able to stop repaying interest for two years.

Any unpaid interest will be added to the mortgage and have to be repaid once the borrower can afford to restart their payments, or when the two-year holiday period has ended – whichever comes first.

If the borrower still cannot afford their mortgage then 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 main qualifications are that someone should have:

• Suffered a loss of income from employment or self-employment which makes full mortgage payments difficult, but which is not expected to be a permanent income loss

• Taken out a mortgage of up to £400,000

• Savings below £16,000

• Received financial advice from a party other than their lender to determine their eligibility for the scheme 

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Tags: Alastair Darling, Budget, Chancellor of the Exchequer, Gordon Brown, Loss of Income, Mortgage

Homeowners who fall behind with their mortgage repayments after losing their jobs or suffer a drop in income can take up to a two-year repayment holiday under a new Government backed scheme.

Announced in the Queen’s Speech, banks and building societies making up 70% of the mortgage sector have signed up to the scheme.

The Government and lenders still need to iron out the final detail but the outline of the plan is:

·      Mortgage payers who are made redundant or face a significant income loss will qualify

·      Loans up to £400,000 are covered by the scheme

·      Lenders will manage the scheme and make decisions based on common guidelines about granting repayment holidays

The scheme comes in to force in the New Year.

By then the details should be clearer, like exactly what a ‘significant loss of income’ amounts to and whether the self-employed are also covered.

The objective is to reignite confidence in the housing market and reduce the number of repossessions.

The Council of Mortgage Lenders, that represents the UK’s bank and building society lenders, speculated that repossessions could rise to 75,000 next year. The CML estimates that repossessions will end up at about 45,000 properties for 2008.

The CML has welcomed the government’s safety net scheme, and promises that ‘won’t pay’ borrowers will not be able to avoid their responsibilities.

“Instead, it will provide welcome reassurance to the vast majority of borrowers that the government and lenders are doing all they can to help keep people in their homes,” said a spokesman.

British house prices tumbled at a record 16.1% in November, according to figures released by the Halifax showing that prices fell 2.6% in November compared to October, and are now 16.1% lower than in November 2007.

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For More information on specific Banks use these links

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Borrowing, House Price, House Prices, Loans, Loss of Income, Mortgage Lenders, Mortgages, Repayment