The Homeowner Mortgage Support Scheme announced to a big fanfare by Gordon Brown in early December is having major holes picked in it already. The government said that under the scheme, homeowners who suffer a “significant and temporary loss of income” as a result of the recession will have the chance to defer a percentage of the interest on their mortgage for up to two years. Householders who would look to the scheme to save them from repossession are going to have to fulfil so many criteria that critics say that fewer than just 10,000 could be allowed to join the scheme.
The treasury said that the scheme would be open to homeowners with a mortgage of less than £400,000 – an estimated 10 million borrowers. However, then the conditions start to seriously wittle this figure down. Firstly, buy-to-let borrowers and those with a second charge against their homes will not qualify – that rules out 1.7 million borrowers. People with more than £16,000 in savings need not apply and you need to be already in arrears with your mortgage to qualify. Potential candidates would also need to speak to a debt advisor, such as Citizens Advice or National Debtline, before being able to approach the lender.
Although debt charities will be expected to assess the suitability of the homeowner, and assess how quickly they will be able to restart payments, the final decision actually rests with the lender. This is where the whole scheme could really fall on its sword as it has emerged that some of the country’s biggest lenders, including HBOS (owner of Halifax), Abbey and HSBC have not given any concrete assurance that they will sign up to the scheme. The lenders in question have only agreed to the scheme “in principle” although ministers are doing their best to put the squeeze on them.
So-called sub-prime lenders, who are estimated to make up around half of all repossessions are unlikely to qualify for the scheme and leading mortgage brokers are saying that the government’s scheme has all the hallmarks of something that has been “cobbled together” at the last minute. Meanwhile the Council of Mortgage Lenders (CML) have been coming up with more gloomy predictions; a predicted 75,000 repossessions in 2009 and 200,000 households more than three months in arrears with their mortgage by the end of the year.
The government is sweetening lenders by guaranteeing any losses in the event of struggling borrowers being unable to repay the mortgage interest that has been rolled forward. The Treasury puts this figure at a potential £100m but critics say that it could be nearer to the £1bn mark if people default en masse. Debt charities have welcomed the scheme and as part of it, the government has promised an extra £15m for organisations such as the Money Advice Trust, who run the National Debtline. They are also set to recruit and train a further 50 debt advisors.