Mortgage rescue plans for repossession risk homes

Tuesday, 25 November 2008 2:36 PM

Repossession-risk homeowners in across the country are being offered fast-track help.

The aim is to help families who suffer loss of income the option to stay in their homes.

Housing minister Margaret Beckett said: "We are determined to do everything possible to provide real help now to homeowners facing tough times, and that means doing all we can to ensure repossession is always a last resort.

"Everyone needs to do their bit to help families avoid the traumatic impact of repossession, and we expect lenders to do more to build on work already under way to help their customers."

New plans bring together a series of initiatives - including pledges from lenders to not start initiating repossession proceedings for at least three months when a homeowner falls behind on mortgage repayments.

David Sayer, global head of retail banking at KPMG, said: "It is in the interests of both the banks and homeowners.

"The banks do not want to flood an already saturated market with more housing and this time also gives consumers the opportunity to pursue other options to keep their homes."

He added: "In some cases repossession will be the only option, but it is right that it is only used as the last resort. This process will ensure that all cases receive a good level of scrutiny and review and that there will be no rushed cases."

Other initiatives include a £200 million Mortgage Rescue scheme to aid 6,000 vulnerable households avoid repossession through local authorities taking a slice of the equity of a property, ensuring mortgage repayments are cut.

The waiting period for Income Support for Mortgage Interest (SMI) will be shortened from 39 weeks to 13 weeks for new working age claims from 5 January 2009.

The chancellor of the exchequer also announced in the pre-Budget report the capital limit on which eligibility for assistance is calculated will be doubled to £200,000 and the standard interest rate for this support will be frozen at the current rate of 6.08 per cent - ensuring those with higher value loans and on fixed rate mortgages don't miss out.

A further £15.85 million will be spent to extend free debt advice to be made available to all consumers across the country.

Consumer Affairs minister Gareth Thomas said: "We want to make sure that homeowners with second loans secured on their home get a fair deal.

"We will create a new framework of minimum standards for responsible behaviour by firms throughout the life of a loan - from the decision to lend money, through ongoing relationships with customers, to what happens when things go wrong."

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