Mortgage support scheme under way

A scheme to allow some mortgage borrowers to stay in their homes if they fall on hard times has begun.

The Homeowners Mortgage Support Scheme (HMSS) will allow borrowers to defer up to 70% of mortgage interest payments if they lose some of their income.

The plan is one of several initiatives that have been launched recently by the government to stop repossessions.

It is being supported initially by five banking groups, and one building society, with others planning to join.

The Housing Minister, Margaret Beckett, said the HMSS would offer temporary help for hard-pressed homeowners.

"The idea of this is to try and help people who haven't lost everything, and who aren't going to be eligible... to be re-housed under homelessness legislation, but who nevertheless are having difficulties," she told the BBC.

"Maybe one of them has lost their job but not both, maybe it's just that they've lost their overtime, but one way or another... they are struggling with the mortgage level payments that they could meet before," she added.

To qualify, applicants will still need to have some income and be able to repay at least 30% of their interest payments; have a mortgage of less than £400,000; and have savings of less than £16,000.

Participants

CRITERIA FOR HELP Home bought before 1 December 2008 Owner-occupiers only Struggling homeowners with a "temporary" loss of income Mortgage must be for less than £400,000 Household savings must be less than £16,000 Monthly repayments can only be cut to 30% of the original level The rest of the payment can be deferred for up to two years PM 'raised false mortgage hopes' Q&A: Help for struggling homeowners

Lloyds Banking Group, Northern Rock, Royal Bank of Scotland, Bradford & Bingley and the National Australia bank group, which includes the Clydesdale and the Yorkshire banks, are taking part, along with the Cumberland building society.

Other lenders which plan to join are the Bank of Ireland, GMAC, GE Money, Kensington, the Post Office and Standard Life bank.

The Council of Mortgage Lenders (CML) welcomed the plan but suggested that only a few thousand people would apply for it.

"The CML does not expect that the guarantee will be triggered in many cases, as the scheme is aimed at borrowers who expect to be able to resolve their difficulties and resume full mortgage payments within a year or two," said the CML's director general, Michael Coogan.

The advantage for lenders is that the government will guarantee 80% of their borrowers' foregone interest repayments if they eventually default on their mortgages.

Complex

The scheme was first announced last December and since then the government has been working out the details with mortgage lenders.

Nearly all building societies, including the largest the Nationwide, and some banks, have decided not to take part formally.

But they have agreed to offer a similar level of support to their customers anyway.

"Customers experiencing a reduction in income and willing to make regular monthly repayments will receive a similar, if not greater, level of forbearance to that provided under the HMSS," said Paul Broadhead, head of mortgage policy at the Building Societies Association (BSA).

A similar commitment has been made by the big banks which are not under any form of government control, such as Barclays, HSBC, and the Santander banking group, which includes Abbey and Alliance & Leicester.

About 80% of mortgage borrowers are therefore covered by some version of this extra mortgage support, the government says.

Last month the BSA complained that the scheme, whose rules run to 200 pages, was far too complex.

Other initiatives designed to stop people being repossessed have included mortgage rescue schemes - which let homeowners become housing association tenants or share ownership of their homes with the associations - and extra income support so that unemployed homeowners can be helped to repay the interest on their mortgages.

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