Homeowners Mortgage Support Scheme

Initially, the scheme, which aims to help borrowers struggling with their loans, was announced by Gordon Brown in December 2008, but it took the government almost 5 months to get the scheme working. Several days ago the government published a list of lenders who signed up for the scheme. 1.    What is Homeowners Mortgage Support Scheme? The scheme was designed to help borrowers who have suddenly lost a substantial part of their income or got redundant. Households that face repossessions can defer up to 70% of interest on their monthly mortgage payments for up to 2 years. Halifax has presented its calculations yesterday. It said their borrowers with a mortgage of £100,000 (4.5% fixed-rate) can pay as little as £110 per month compared to £630 on a full payment basis. 2.    What lenders signed up for the scheme? As for now, government-owned/controlled banks such as Lloyds Banking Group (Halifax, Royal Bank of Scotland and Natwest) have agreed to participate in the scheme. Northern Rock and Bradford and Bingley have also signed up. Other lenders include: National Australia Bank, Yorkshire banks and Clydesdale. Cumberland Building Society is the only building society that is participating in the scheme. GMAC, GE Money, Bank of Ireland, Kensington, Standard Life Bank and the Post Office are still negotiating with the government; they are expected to join the scheme at a later date. All the lenders have Government guarantees if the borrower defaults. 3.    Who is eligible to apply? Borrowers who have bought their properties before December 1, 2008 and have an outstanding mortgage of not more than £400,000 and savings of not less than £16,000 qualify for the scheme. The borrower must also have been making regular mortgage repayment in the last 5 months. 4.    Is it possible to avoid paying back the mortgage? The scheme allows to defer the mortgage, not to cancel it. The deferred money will be added to the overall debt. 5.    What are the exceptions to the scheme? If the borrower owns more than 1 home (for instance, if he is a buy to let landlord) – he can not apply for the scheme. Also, if the lender believes the borrower will be unable to either earn as much as he did before or meet reduced monthly payments, the borrower might be disqualified. 6.    What if the borrower’s lender refused to sign up for the scheme? The following lenders have refused to participate in the scheme: HSBC, Abbey, Nationwide, and Barclays (including Woolwich and First Plus). They have promised to make “comparable arrangements” to help their borrowers.