The Treasury has announced further details of the Government's mortgage support scheme to help people to stay in their homes if they are hit by unemployment.
The new scheme will provide a "bridge" for homeowners, the Treasury
said, affording them up to two years' hiatus on paying interest on their mortgage
, enabling them to stay in their homes if they suffer a temporary fall in income "without the added concern and stress of potentially losing their home in the interim".
Lenders will be able to reduce a customer's mortgage payments for up to two years by removing the interest payments, but these will be "rolled up" and added onto the total amount borrowed, to be repaid at a later date when the borrower's financial circumstances have improved.
A proportion of any losses which the lenders face, if the homeowner cannot afford to return to a normal payment plan at the end of the two year period, will be guaranteed by the Government.
Customers will be able to apply for the scheme but will be subject to a lengthy list of eligibility criteria to "ensure that there is proper risk sharing between Government, lenders and borrowers and the scheme is sustainable for those that participate." according to the Treasury.
Borrowers will have to prove that they have suffered a loss of income from employment which makes keeping up with their mortgage repayments difficult, but which is only expected to be a temporary loss; they must have had a dialogue with their lender and made use of existing contingency plans; some level of regular payments must have been made; it will only be available to those who have borrowed up to £400,000; applicants must have less than £16,000 in savings and must be the owner-occupier of the property, as it is not available for second homes or buy to let mortgage
The scheme is also limited to those who are not already in receipt of Government mortgage rescue assistance, have been assessed as being able to pay a certain amount on an ongoing basis, have received financial advice from a party other than their lender, in order to determine their eligibility, and been in mortgage arrears for a number of months.
Analysis from the BBC has estimated that as few as 9,000 homeowners might benefit from the scheme, because the majority of struggling households will not be able to meet all of the Government's criteria.
What's more, the Treasury has said that the UK's eight biggest mortgage lenders
which cover 70 per cent of the market – comprised of HBOS
, Northern Rock, Barclays
and HSBC Bank
– have so far only agreed to support the new scheme "in principle".
The plan is "disappointing", Louise Cumming from moneysupermarket.com told the BBC.
"This scheme is virtually worthless and will benefit very, very few homeowners who may be struggling," she said. "The list of criteria that must be fulfilled before borrowers are even considered means that few will qualify and even fewer will actually be granted assistance due to the fact it is voluntary on behalf of the lenders."
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