Responses to government mortgage support scheme

Date:Thursday 15th January 2009
Author: Max Freedman

Responses have been made to a government scheme that would enable struggling mortgage holders to defer interest payments for two years.

Although the Homeowner Mortgage Support Scheme was largely welcomed by the Council of Mortgage Lenders (CML), the organisation did warn that there would be an impact on borrowers once they make a financial recovery.

Michael Coogan, director-general, said that if a large amount of interest is deferred, there may be a "very significant" influence on future repayments and stressed that the scheme is not a "free lunch".

The CML suggested looking that the government's guarantee to the mortgage lender should last for up to a decade and include the full amount of interest that has been deferred.

The Building Societies Association (BSA) also welcomed the scheme but added that it will not assist as many people as the government thinks.

It urged borrowers to tell their lenders as soon as they have difficulty.

BSA head of mortgage policy, Paul Broadhead, said that building societies view repossession as "the last resort".

He also warned that the scheme, if not properly thought out, may prevent further mortgage lending as lenders need to retain more capital when borrowers are in arrears.