His latest scheme will see £1bn of mortgage interest repayments guaranteed to those who cannot pay their loans as a result of unemployment. It will cover mortgages up to £400,000 for as much as two years.
But experts have criticised the plans. Association of Mortgage Intermediaries Director of Policy Andrew Strange says: “We caution that capitalising two years’ deferred mortgage payments could significantly add to a borrower’s overall debt, which combined with falling property prices does raise the question of negative equity.”
Strange says that the cure to the problem ultimately lies in helping liquidity in the mortgage market via the proposals of Sir James Crosby.
He adds: “Clearly, we welcome any move to further assist homeowners who are facing financial difficulties and risk losing their homes. However, as always the devil will be in the detail, and we look forward to discussing this further with the Treasury.”
Payplan managing director John Fairhurst says: “Plans by the government to help those facing repossession are good news – but only for those who suffer an unexpected change in their circumstance, such as job loss.
“However, the majority of clients that contact Payplan about mortgage arrears have not experienced a loss in income, but simply cannot keep up with their debt repayments. Those that come to us facing repossession also owe on average £42,000 in unsecured debt. It is vital that lenders ensure they also have effective policies in place to assist this significantly larger group of struggling borrowers.”