UK Government

Communities and Local Government: Healey: action by government and lenders keeping families in their homes

Press Release   •   Dec 10, 2009 11:29 GMT

Housing Minister John Healey today welcomed the extension of support to 220,000 struggling homeowners announced by the Chancellor earlier. They will now continue to receive much needed help with their mortgage interest payments and help them stay in their homes. Mr Healey also published new figures that show lenders are going that extra mile to ensure repossession is always a last resort and that thanks to backstop schemes supported by Government or put in place by lenders themselves thousands of families are receiving crucial help to make their monthly mortgage payment affordable until their income recovers. 135,000 families now have formal repayment agreements on a flexible basis, 74 per cent more than a year ago. Today’s figures show that 6,000 of these are on terms equivalent to the Homeowners Mortgage Support (HMS) scheme standard and only 15 have so far needed the formal backstop of the HMS scheme. The Pre Budget Report also confirmed that thanks to the Government’s comprehensive package of support for people struggling with their mortgages over 330,000 families have been helped so far during the recession. This includes tighter rules so repossession is always a last resort, tougher tests for lenders in court so they must prove they have exhausted every possible option before taking repossession action, £130million for debt and advice services and the targeted schemes such as Mortgage Rescue and HMS. Last month the Council of Mortgage Lenders (CML) said that because of Government action and extra forbearance by lenders they revised down their forecast on the number of repossessions this year from 65,000 to 48,000. John Healey said: "Today's announcement by the Chancellor to extend payment cover for mortgage interest when people lose their jobs and are struggling with their finances will be a welcome boost to 220,000 families. It will give them peace of mind over Christmas and through the new year that Government support will continue to help them stay in their homes. "Fortunately only 15 families have needed to use the Government's formal backstop scheme. But by establishing this scheme we have set the standard in the industry with 6,000 families benefiting from equivalent flexible payment agreements. It is playing a vital role in making sure lenders are being more patient with their customers, offering more flexible arrangements and only using repossession as a last resort. "Government's comprehensive package of support for struggling homeowners has helped over 330,000 families so far during the recession. Both lenders and money advisers have said this is making a real difference. Whether through the extra Government funded free advisors or the backstop support schemes homeowners are seeking advice at an early stage that in many cases can make all the difference. "Although repossessions and arrears are currently running at half the rate of the early 1990s the risk of repossession will stay high throughout next year. That's why I have said I will step up Government efforts so families struggling with their mortgages have access to the practical, impartial help and advice they need to take control of their finances." Secretary of State for Work and Pensions, Yvette Cooper said: "We know that families are struggling with their housing costs during this recession and we want to do everything we can to help. That's why when the recession hit, we shortened the waiting period and froze the rate at which we pay Support for Mortgage Interest at 6.08 per cent. We’re now going to maintain that rate for a further six months, so that vulnerable families continue to get the help they need with their mortgage interest payments." Michael Coogan, Director General, CML, said: "Lenders are determined to ensure possession is a last resort. With earlier and better communication between lenders, consumers and debt advisers, arrears are being managed through the recession and possession action minimised wherever possible. "However, a state safety net is also a vital part of the picture, and so we welcome today's announcement of no change to the rate for support for mortgage interest at 6.08 per cent. In a low interest rate environment, and with so much progress being made by lenders and borrowers together, it is no surprise that the back stop government schemes have not been widely used. This situation may change if pressures build, as interest rates rise in the future. So we are committed to continuing to work with government to ensure the best possible outcomes for borrowers going through short term financial difficulties." 135,000 households are now benefiting from lender forbearance, 74 per cent more than a year ago. New figures provided by Homeowners Mortgage Support lenders and money advisors show: Over 33,000 loans were benefiting from extended forbearance where lenders were accepting less than contractual monthly payments or where loans had been modified to make monthly payments more affordable for the borrower. 6,000 of these loans were deferring interest as part of an arrangement equivalent to the Homeowners Mortgage Support scheme, and only 15 have so far needed the formal backstop of HMS and have been registered for the Government-backed guarantee following the 5 month qualification period. Over 7,000 households have received free, independent money advice where Homeowners Mortgage Support and other options were discussed since April 2009. As part of the Pre-Budget Report the Chancellor today announced that the Standard Interest Rate used to calculate Support for Mortgage Interest will be maintained at 6.08 per cent for a further six months. This increased support will continue to benefit around 220,000 homeowners during the recovery – helping to ensure the payments meet more of the interest for the greater proportion of borrowers. When HMS was launched in April 2009 over 50 per cent of the mortgage market agreed to offer the Government-backed scheme with a further 30 per cent of the mortgage market committing to offer similarly extended forbearance to struggling homeowners. The proportion of the mortgage market now committed to offering the Government-backed scheme or similarly extended forbearance without the need for Government guarantee is now more than 90 per cent. Lenders and money advice agencies have said the Government’s targeted safety net schemes have been key in encouraging households to seek advice early when they start struggling with their mortgage, enabling them to work with their lender to find a solution so they can stay in their home. Notes to editors 1. Figures on Homeowners Mortgage Support are management information provided by lenders and money advice organisations. 2. Homeowners Mortgage Support lenders include those who have agreed to offer the Government-backed scheme and those committed to offer similarly extended forbearance without taking up the Government guarantee. Contacts NDS Enquiries Phone: For enquiries please contact the above department ndsenquiries@coi.gsi.gov.uk