Banks agree to give mortgage holders more time to pay

Timesonline 25 Nov 08

Homeowners who are facing repossession were given a lifeline yesterday as the Chancellor confirmed that some of Britain’s biggest lenders had agreed not to repossess properties until at least three months after borrowers first go into arrears.

Announcing a series of measures designed to boost the ailing housing market and keep people in their homes, Alistair Darling said that repossession would only be sought as a last resort after other alternatives, such as a minimum payment plan, had been pursued.

The move comes as about 45,000 homeowners are expected to have had their properties repossessed by the end of this year as workers lose their jobs and house prices continue to decline. House prices have fallen by 15 per cent in the past year, according to Halifax figures, while economists say that unemployment could rise to more than three million by 2010. The number of borrowers in arrears is expected to reach 200,000 by Christmas.

However, Mr Darling dashed hopes for an immediate housing market recovery by delaying the introduction of a proposal that would have encouraged banks to start lending again

A measure to improve access to mortgages published yesterday in a report by Sir James Crosby, the former head of HBOS, will now be shelved until the Government has received EU approval for the plans.

While Mr Darling confirmed that the Government would provide a guarantee for mortgage-backed securities that could encourage lending between banks, the plan is not expected to come into force until next spring’s Budget at the earliest.

Meanwhile, the Council of Mortgage Lenders (CML) said that not all borrowers would be protected by the three-month “moratorium” on repossessions because only a handful of big lenders had agreed to the proposal. Customers with sub-prime or buy-to-let deals from smaller, specialist lenders could still be repossessed within three months.

Michael Coogan, director-general of the CML, said: “Everything announced today is helpful, if modest. But it is vital to recognise that not all lenders are the same, and not all have received support from the Government’s interventions in what remains a very difficult financial and economic environment.”

This has a direct bearing on the extent to which they are able to deliver on the Government’s multiple aspirations to increase the flow of new lending, be more lenient to borrowers in arrears and improve their individual capital position.”

Other proposals to help homeowners were met with cautious approval by debt charities and housing market experts.

Mr Darling increased the maximum loan size for borrowers who become unemployed from £100,000 to £200,0000 for income support for mortgage interest and extended a mortgage rescue scheme to help those with second-charge loans on their properties. Borrowers who had secured other debts against their properties had previously been excluded from the government mortgage rescue scheme.

Mr Darling pledged to set up a special “lending panel” of consumer groups and industry associations that will monitor lending by the banks. A further £15 million will be made available to provide free debt advice and £775 million will go towards the provision of shared ownership homes for first-time buyers who cannot afford to buy outright.

First-time buyers could also benefit from a proposal to set up a special savings scheme that would offer tax relief on saving towards a deposit.

Joanna Elson, chief executive of Money Advice Trust, said: “Struggling homeowners and people in debt have been given a real helping hand in this PreBudget Report. Additional funding for National Debtline and Business Debtline will allow us to expand capacity and recruit an additional 45 to 50 advisers during 2009.”

However, housing industry experts said that the Government had missed an opportunity to offer more effective solutions, such as an extension of the stamp duty holiday.

Ross Bowen, managing director of Connells, the surveyor, said: “The Government should have ensured the recommendations to free up mortgage availability could be implemented immediately. They now need to look at other ways of stimulating mortgage availability. Further interest-rate cuts will be necessary and a full stamp duty holiday would help stimulate all sectors of the market.”

 David Pank, Sales Director with Manning Stainton, the leading estate agents in Leeds and Wakefield, broadly welcomed the news but fears it is just not enough."Banks should be forced to use some of the money obtained from tax payers through the Government to help tax payers buy properties. This would do most to help the sale of properties in leeds and Wakefield"