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Government helps recession-hit homeowners with mortgage support

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Wednesday, 22 April 2009

Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

Having trouble meeting your mortgage repayments? Worried your home will be repossessed? Homeowner Mortgage Support could be what you need.

The government yesterday launched its Homeowner Mortgage Support (HMS) scheme, which was first outlined in December.

The scheme is designed to help people keep their homes if they fall on difficult times.

“If you are struggling, contact your lender or an independent advice charity.”

It will enable homeowners who suffer a temporary loss of income to cut their mortgage interest payments for up to two years, with the government providing a guarantee to the lender if the borrower defaults.

Housing minister Margaret Beckett said the new support will “help borrowers who just need a bit more time to get themselves back on their feet” and urged those struggling with mortgage payments to contact their lender as soon as possible.

Teresa Perchard, director of public policy at charity Citizens Advice (www.citizensadvice.org.uk), said HMS is a “welcome addition aiming to fill a specific gap in the safety net for homeowners who may not be eligible for other assistance.”

Peter Williams, executive director of the Intermediary Mortgages Lenders Association (www.imla.org.uk), warned however that HMS is unlikely to be “an all purpose panacea” for struggling homeowners, due to its complex set of eligibility criteria. He added though, “the fact remains that lenders are already providing substantial support and flexibility to help people stay in their homes.”

To be eligible for HMS, you must:

Have bought your home before 1 December 2008
Be an owner-occupier
Have an outstanding mortgage of less than £400,000 and savings of less than £16,000
Have a regular household income and be able to make a minimum contribution of 30% of the total interest payment
Have talked through other options with your lender and have been making regular payments for at least five months
Have sought independent money advice

The following lenders are now offering HMS:

Lloyds Bank Group (including Halifax and Bank of Scotland)
Northern Rock
The Royal Bank of Scotland (including NatWest and Ulster Bank)
Bradford and Bingley
Cumberland Building Society
The National Australia Bank Group (including Clydesdale and Yorkshire Bank)

Others, such as the Bank of Ireland and the Post Office have said they will offer HMS as soon as possible, while the following four high street lenders have said they will offer comparable agreements to their customers, but will not take up the government guarantee:

HSBC
Nationwide
Barclays (including First Plus)
Santander (including Abbey and Alliance and Leicester)

Money advisers that have been trained to provide advice on HMS include Citizen’s Advice, Shelter (www.shelter.org.uk), CCCS (www.cccs.co.uk) and National DebtLine (www.nationaldebtline.co.uk).

Chris Eagle, commercial manager at CreditChoices.co.uk said: “It’s important to note that if your monthly payments are reduced for a period of time with HMS, the term of your mortgage will be longer and you are likely to end up paying more interest overall.

“If you are struggling, contact your lender or an independent advice charity like Citizens Advice to discuss all your options.”

More information about HMS can be found on the Directgov website (www.direct.gov.uk/HMS).

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