Government help schemes still AWOL
The financial support required for a major government scheme aimed at homeowners struggling to make mortgage repayments still remains uncertain despite the government setting a deadline that has now passed.
The scheme, which was to start in April, defers payments for some people who suffer a temporary loss of income.
The director of one major building society has claimed that around 50% of building societies will not take part in the Homeowner Mortgage Support Scheme.
The government has said it would release details of participating lenders soon, although this is unlikely to calm those in financial trouble.
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. In a statement aimed at explaining this seemingly contradictory statement they said, “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.”
The estimated 50% of building societies which will also not sign up to the scheme are thought to have the same or similar reasons as the Saffron Building Society. The Building Societies Association told the BBC’s Working Lunch program 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.
In an attempt to clarify the situation, the Department of Communities and Local Government issued a statement which 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 will be reduced to a minimum of 30% of what they were paying before, and the deferred amount will be added to the outstanding mortgage to be paid later.
The opposition parties have said that the scheme was announced hastily to grab publicity, without having been properly thought through. It is certainly true that the government has been keen to show its support for struggling homeowners amid gloomy data regarding housing and employment, but that support has been very slow to materialise once it has been ‘announced.’
There is little analysis to be done on the issue besides expressing a hope that the Government will get its act together. Fast.
