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Government puts meat on mortgage aid scheme

The Government has revealed details of its hastily-prepared mortgage support scheme that was announced after the Queen’s speech last week.

The Prime Minister Gordon Brown told the Commons of the scheme to help those out of work with their mortgage interest payments for up to two years. He revealed the eight largest UK banks – HBOS, Lloyds TSB, Nationwide, Northern Rock, Abbey, RBS, Barclays and HSBC – had agreed to the plan, but gave no more details.

But now the Treasury has revealed scheme will be voluntary and subject to eligibility criteria. To qualify, borrowers will have suffered a loss of income from employment or self-employment of a scale which now makes full mortgage payments difficult, but which is not expected to be a permanent loss of income.

They will have talked to their lender, and will have been making some level of regular payment. The mortgage limit is £400,000 and the borrower must have less than £16,000 in savings.

The borrower must have seen an independent adviser, who will have to determine their eligibility for the scheme, including testing the long-term sustainability of their financial position, and their ability to resume full payments once their income increases.

To be eligible, the mortgage lender must have tried to exercise forbearance on the mortgage. Also, the Government says this scheme will not apply to people with second homes or buy-to-let properties, but it will be available to the self employed and self certified mortgage borrowers.

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