Eltham Labour Party

 

Helpful Support for Homeowner's

Homeowners Support Scheme

Homeowner Mortgage Support Scheme

A new Government-backed guarantee scheme to help people at risk of repossession

In these difficult economic times, it is vital that we do everything possible to provide support for homeowners facing difficulties. That is why I have welcomed the new Government-backed 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 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.

The result will be more affordable monthly payments for homeowners needing a bridge through difficult times. The new scheme will help those families who are not eligible for the existing support for those on benefit, which we are separately extending next month to offer more help, more quickly.

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

Repossessions are rising although the numbers affected remain small. But for those affected, repossession is a major trauma that can affect people’s relationships, health, well-being and quality of life.

The scheme will offer real help for homeowners who face the prospect of repossession through no fault of their own. It will enable people to rearrange their finances so they can come through a difficult period without losing their home.

Q&A

When will this be up and running?

We will be starting urgent discussions with the lenders immediately to agree the detailed operation of this scheme. We hope that the scheme will be up and running in early 2009.

How long will the scheme / guarantee run for?

We anticipate that the scheme will be available for up to 2 years, though the Government will keep this timescale under review. We will consider, in discussion with lenders, the appropriate duration of the guarantee.

Why only two years?

This is a specific measure to provide extra help to home owners during the current economic downturn – not a permanent fixture.

Who will this scheme help?

This scheme is aimed at helping those households who suffer a significant reduction in income as a result of the downturn and who have been working with their lenders to try and find a solution to enable them to stay in their homes.

Government are developing eligibility criteria to ensure that households who have spent or borrowed recklessly will not benefit from new support available. This is not about supporting home ownership that is unsustainable in the long term.

This product is not available to people who have second homes, buy to let mortgages or investment properties.

It will be important that households seeking help through this scheme take up independent financial advice, to ensure that they consider the full range of options available to them and that this approach is appropriate for them.

Out of work households claiming Support for Mortgage Interest and vulnerable households applying for Mortgage Rescue will not be eligible.

What does a ‘temporary but significant loss of income’ mean?

It is important that households receive independent financial advice to help ascertain how quickly they are likely to recover from any current loss of income.

Examples might be where one member of a two earner household loses their job; or where regular overtime payments are curtailed due to the economic downturn. As with other repayment or mortgage rescue plans, the decision will, however, be one for the lender, supported by information provided by the borrower and by the independent financial advisor.

How many people will this help?

It is not possible to say in advance of detailed negotiations with the lenders. We need to work with the lenders over the coming weeks to agree the detail of how the scheme will work and what the eligibility criteria will be.

How much is the scheme going to cost?

The cost to Government will only occur where repossession takes place and the proceeds of the sale of the repossessed property do not cover the deferred interest payments owed to the bank after the lenders first loan has been repaid.

We hope that the period of up to 2 years will allow households to get back on track and avoid the threat of repossession.

For more information on the scheme, click here.