Uncertainty Over Mortgage Support Scheme
Support for a scheme for homeowners struggling to make mortgage repayments remains uncertain as a deadline for lenders to show their support has passed.
50% of building societies will not take part in the Homeowner Mortgage Support Scheme, according to the head of one building society.
The government said it would soon release details of participating lenders.
The scheme, to start in April, defers payments for some people who suffer a temporary loss of income.
In December, Prime Minister Gordon Brown said that people made redundant or who face a “significant loss of income” would be allowed to defer a proportion of interest payments for up to two years.
He suggested that the eight largest lenders – HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS and HSBC, which together provide 70% of mortgages – have agreed to sign up to the scheme.
One lender, Saffron Building Society, has become the first to announce that it would not sign up – although it applauded the sentiment of the scheme.
“We have concerns that the reporting and administration requirements under the scheme are overly burdensome, especially as we do not believe that this scheme is likely to provide any additional help to our borrowers,” said chief executive Andy Golding.
He estimated that 50% of building societies would not sign up to the scheme, generally for the same reasons.
Paul Broadhead, of the Building Societies Association, told the BBC’s Working Lunch that the complexity of the scheme meant that a 200-page document was sent to building societies only a week ago.
An initial deadline of 20 March was set for lenders to signal their support to the scheme but the government said that it would not yet release names of the participants.
A spokesman for the Department of Communities and Local Government, said: “We are urgently continuing discussions with lenders on joining the scheme and it is wrong to suggest there is a cut off point for signing up. We want to see as many lenders as possible participating in the scheme.
“As we have previously said, the scheme will be open for business with the first lenders in April and will make a real difference to households who are worried about meeting their mortgage payments in the difficult economic climate.”
A series of conditions have already been outlined for those homeowners who could benefit from the scheme.
Those who have a “temporary” loss of income, have a mortgage of less than £400,000, and savings of less than £16,000 will have the opportunity to be involved.
Their monthly payments would be reduced to a minimum of 30% of what they were paying before, and the deferred amount would be added to the outstanding mortgage to be paid later.
Opposition parties said in February that the scheme was announced hastily to grab publicity, without having been properly thought out.
The government has been keen to show its support for struggling homeowners amid gloomy data regarding housing and employment.
This week figures showed that UK unemployment rose above two million for the first time since 1997 and other data showed that gross mortgage lending fell by 60% in February compared with the same month a year earlier.
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