Gordon Brown has announced a new initiative to help homeowners losing their jobs pay their mortgages.
Under the terms of the scheme, those with mortgages of Â£400,000 or less will be able to defer a proportion of their mortgage interest repayments for up to 2 years, if they suffer a redundancy or “serious reduction in income”.
The lender and borrower will agree exactly what proportion of their repayments will be deferred, and this could be as much as 100%. The Government (and therefore our taxes) will guarantee the interest which can’t be paid back initially, although the hope is that this will eventually be paid off by the borrower, rather than the taxpayer, when their situation improves.
The way this has been announced has caught a few people by surprise – both through the apparent lack of detail in the announcement, and also because Gordon Brown has said that the big banks have all agreed to the scheme when the reality appears to be quite different.
Housing minister Margaret Beckett has also suggested that this scheme will help around 9,000 people, which is a pretty small number given that there could be as many as 75,000 repossessions next year.
More details will hopefully emerge tomorrow, at which point we should have a better idea of the effect of the scheme, how it will work and which lenders are on board. That’s if the announcement isn’t forgotten following another big cut in interest rates, which could take place tomorrow.
In the meantime, it’s worth reading Robert Peston’s thoughts on this in his blog post “Taxpayer Mortgage Guarantee“.
photo credit: World Economic Forum