Brown promises help for homeowners in trouble

Early December saw the UK Government promise a guarantee to homeowners that find themselves in trouble with their mortgage repayments in an effort to stem the expected tide of repossessions that many see as a result of the current economic crisis.

The scheme is aimed at those who find themselves redundant with a mortgage to pay, as such individuals are expected to become more numerous with companies going to the wall thanks to the ‘credit crunch’ that is sweeping the country.The details of the proposal are quite specific, and will only be available on mortgages below a £400,000 limit.

Who qualifies?
As said above the scheme is aimed at those who are about to, or have, found themselves redundant, and will enable the borrower to defer interest payments for an agreed period of up to two years dependant on individual circumstances.

The individual agreement will be between the borrower and the lender and the biggest lenders in the UK market have all agreed to accept the initiative. These include such luminaries as Lloyds TSB, Abbey, Nationwide and HBOS, plus Barclays, Northern Rock, RBS and HSBC.

Families who, as the government quote, find themselves ‘with a significant loss of income’ will be entitled to apply, and this is thought to cover those who have been made redundant, persons whose overtime has been cut as a result of cost cutting and also those who have been forced to take lower paid jobs.

The deferred payments will be paid back as extra payments, presumably once the borrower has found a job, and in the meantime the treasury will underwrite the costs involved. The lenders mentioned represent almost three quarters of mortgage lending in the country.

So there will be no more repossessions?
There will still be repossessions as there will continue to be people who are in situations that have gone beyond a recoverable position. The idea is to help those who may suffer a temporary inability to pay.

Many critics have pointed to the potential for people to simply play the system and to refuse to pay when they actually can, yet it is believed safeguards are to be put in place to alleviate this possibility.

Further criticism has been levelled by those who point out that all the scheme will do is increase the overall debt that the individual shoulder son the property, in an average case by ten percent, yet supporters have countered that they will retain an asset that would previously have been taken from them.

In addition it has been pointed out that many people pay into insurance schemes that are there to provide exactly this service, yet little has been forthcoming from the government with regard to this apparent conflicting situation.

What to do if you get into trouble
It has always been the case that repossession is a last resort, as the lender wants to recover all of their money and not just a small proportion. The same rules apply to those who see a problem arising, including contacting their mortgage lender and attempting to negotiate a repayment holiday. Most lenders have a policy of waiting for at least three months before repossession proceedings kick in, and some even more than that.

Further, those who find themselves on Job Seekers Allowance can apply for help in paying the interest on outstanding mortgages, although anyone with a partner or spouse earning in excess of £16000 per annum will not be considered for financial help.

Repossessions have increased by over ten percent in the latter months of 2008, and forecasters predict that, despite the government initiative, in excess of 75,000 homes may be repossessed in 2009, a figure far greater than the 45,000 total expected for this year.

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