The move comes after the Ministry of Justice announced a 17 per cent rise in repossession orders in the past year and the Council of Mortgage Lenders forecasted 45,000 repossessions in 2008 compared to 27,100 last year.
The Government’s package includes measures to ensure financial advice and support is available for borrowers who need it and an additional £9m funding for face-to-face debt advice which will be provided by third sector partners including Citizens Advice Bureau.
Treasury and housing ministers will meet consumer and debt advice groups next week to discuss what more can be done to help borrowers who are experiencing difficulties, including what further financial support the industry could provide.
Lloyds, Barclays, RBS, HBOS, Abbey and HSBC have agreed to work closely with the groups to establish how to avoid a repossession disaster. Following a meeting with the Chancellor last month, the CML and the FLA agreed to review their voluntary arrangements, working with consumer groups, and report to Government by the end of May.
As a result the Government wants to see best practice guidance that will ensure people on fixed rate mortgages are given sufficient warning before their repayments change and that banks and building societies will engage with customers early to see if they can help people who are experiencing short-term difficulties by rescheduling repayments. It is also calling on banks and building societies to provide advice to borrowers on how they can access independent debt advice at the earliest possible stage and ensure repossession is only be used as a last resort.
Alistair Darling says: “It is clear from speaking to consumer groups and the mortgage industry that borrowers may be concerned about the impact of the current market conditions on their mortgages. That is why it is vital that the Government, working with industry, offers as much support as possible both directly to those people and to the consumer advice groups who can help them in their day-to-day lives.”
Housing Minister Caroline Flint says: “We know that some borrowers are concerned about their mortgages in the current market conditions. Some lenders are now passing on interest rate cuts and we want to see the rest follow as soon as possible. But for the minority of owners who may need support and advice now, we want to ensure it is there for them in the right place and at the right time.”