Video: Homeowner Mortgage Support Scheme launched

Monday, 27, Apr 2009 12:00

Today the government launched the Homeowner Mortgage Support scheme (HMS), in a bid to help those who could face repossession.

The scheme will aim to support borrowers who are struggling, perhaps through redundancy, to make payments on their mortgage, by reducing the interest they are required to pay for up to two years.

The scheme was officially launched by housing minister Margaret Beckett today, and will be available throughout the UK.

So what is the HMS?

The department for Communities and Local Government claims the scheme will "enable eligible borrowers who suffer a temporary loss of income to cut their mortgage interest payments for up to two years to help them get back on track with their finances".

Repayments will be reduced to 30 per cent of the interest owed, and will be available from a number of high street banks, who will be protected by a government guarantee.

Ms Beckett was at pains to make it clear HMS does not offer a 'payment holiday', and the total amount owed will eventually have to be paid back.

Which banks will be offering the scheme?

From today, the following high street lenders, who will offer their customers HMS, are:

Lloyds Bank Group (which includes Halifax and Bank of Scotland)

Northern Rock

The Royal Bank of Scotland (which includes NatWest and Ulster Bank)

Bradford and Bingley

Cumberland Building Society

National Australia Bank Group (which includes Clydesdale and Yorkshire Bank)

Bank of Ireland (which includes Bristol and West), GMAC, GE Money, Kensington Mortgages, the Post Office and Standard Life Bank, have all confirmed they will be joining HMS as soon as possible.

Barclays (including First Plus), HSBC, Nationwide and Santander (including Abbey and Alliance & Leicester) have all confirmed today they will offer comparable arrangements to HMS to their customers, while opting not to take up the government guarantee.

Who will be eligible for the scheme?

There are a number of criteria which must be met before a borrower is eligible for the scheme. Firstly, they must have bought their home before December 1st 2008, and be an owner-occupier, as the scheme is not open to buy-to-let/investment property.

The borrower must have an outstanding mortgage of less than £400,000 and savings of less than £16,000.

A criticism of the HMS is that the household must have a regular income and be able to make a minimum contribution of 30 per cent of the total interest paid; meaning the scheme may only be useful when one partner in a two person income household loses their job.

They must also have talked through the options with their lender and have been making regular payments for at least five months, as well as having sought independent money advice.