Government announces plans to help with mortgage repayments
The Government plans to help the middle class income borrowers who are struggling
to keep up with their mortgage repayments. This was announced by the Prime Minister
in a debate on Queen's speech. The Government aims to slow down the rising tide
of repossessions, as job losses and rising household costs push more and more
households into mortgage arrears.
It is reported that more than 30,000 homes had been repossessed by end September
, more than in the whole of last year, and the number is expected to rise further
next year.
The scheme enables to defer mortgage interest payments for up to two years
for households that have temporarily lost some or part of their income. Borrowers
can speak to their lender and arrange a payment break, and at the end of the
period the unpaid interest will be added to the outstanding mortgage. If at
that point the borrower is unable to repay theloan, the government would assist
to cover the missing payment.
Prime Minister told the Commons: "The result will be more affordable monthly
payments for homeowners who are needing a bridge through difficult times."
He also said that eight lenders had so far signed up to the scheme, including
HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays and HSBC. Between
them they represent around 70% of the mortgage market.
According to a spokesman for the Treasury, by guaranteeing the payments in
this way, the government was encouraging banks to consider requests for payment
breaks. He added that lenders would need to take a commercial decision on each
case, subject to guidelines on treating customers fairly outlined in the banking
code and says, the scheme was aimed at people who were not entitled to claim
benefits.
Mortgage lenders such as Nationwide welcomes the scheme. However, according
to the Council of Mortgage Lenders, the scheme would not be for everyone and
would not be "a charter for 'won't pay' borrowers to avoid their responsibilities".
It added, "It will need careful development with lenders and the CML to
ensure it is properly targeted to those borrowers committed to sustain their
home ownership through short-term periods of financial difficulty.”
The Government has been pressing on lenders to use repossession only as a last
resort and has introduced a range of measures to help hard-pressed borrowers.
The Government’s pre-budget report confirms its plans to make benefits
covering mortgage interest available more quickly to those who lose their jobs,
reducing the waiting period from 39 to 13 weeks.
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