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Mortgage rescue plan
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Mortgage rescue plan for homeowners
Thursday 4 December 2008
By Becca Talbot becca.talbot@consumerchoices.co.uk
Cash-strapped homeowners will be able to take a two-year mortgage payment holiday under a £1billion rescue plan announced by the government yesterday.
Following the Queen’s speech yesterday, Gordon Brown proposed a £1billion repossession rescue package to help hard-pressed families and middle-income homeowners caught up in the recession.
Those who lose their jobs or are forced to take a “significantly lower” salary will be entitled to take a two-year payment holiday, guaranteed by the government, before their home is at risk of repossession.
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"Households that experience a redundancy or severe loss of income will be able to defer a proportion of their interest payments for up to two years..."
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The scheme, which will come into force early next year, will apply to homeowners with mortgages of less than £400,000, and savings of less than £16,000.
Brown said customers of HBOS (www.halifax.co.uk), Nationwide (www.nationwide.co.uk), Lloyds TSB (www.lloydstsb.com) Abbey (www.abbey.co.uk) and government owned Northern Rock (www.northernrock.co.uk) will be able to negotiate deferments of their payments, however specific details of the rescue plan have not yet been released.
Lloyds TSB spokesman Stephen Pegge said the plan was “welcome” as part of range of measures to help homeowners but confirmed the bank had not seen the details yet. “We want to work with the government to make sure this will really work,” he told Channel 4 News.
Brown said: “Hard-working households that experience a redundancy or severe loss of income as a result of the downturn will be able to defer a proportion of their interest payments for up to two years as they get their family finances back on track.”
Brown said he hoped more banks will join the scheme, under which the Treasury will guarantee all the payments that are deferred. Further details of the scheme will be announced in the next few days.
Liberal Democrat Shadow Chancellor, Vince Cable said: “We welcome the fact that the Government is now finally acting to head off large scale repossessions which devastate families, impose losses on the banks and create major re-housing problems for local councils.”
“We must look at the small print,” he continued. “Last time the Government made an announcement on repossessions it only ended up helping 1 in 10 families. There is also the fear that the underwriting scheme will mean less money going to banks in the short-term, which could further reduce liquidity in the market.”
Financial experts predict liabilities with the scheme to reach about £1billion and losses - through borrowers’ ultimate failure to pay - to be about £100million.
Chris Eagle, commercial manager at CreditChoices.co.uk said: “This announcement by Gordon Brown is a welcome one, and many of those fearing repossession will be breathing a sigh of relief. However, the key is in the detail and until more information about the scheme is released it’s unclear just how big an effect it will have on homeowners and the market itself.”
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