Real help now to support homeowners through difficult times

A cross-government package of new measures and reforms to provide real help to families at risk of repossession was today announced by the Chancellor Alistair Darling in the Pre-Budget Report.

The measures are the next steps in a wide range of support the Government is putting in place to make sure that hard working people who suffer a loss of income through no fault of their own have the option to stay in their homes, and that repossession is always a last resort.

The measures include:

• Agreement with major lenders to wait at least three months before initiating repossession proceedings, in order to explore all other alternatives. The Government has also welcomed the commitment by lenders to look at all possible options to prevent repossession, such as reducing payments and mortgage rescue schemes.
• Bringing forward the Government's £200 million Mortgage Rescue scheme to start early in a number of local authority areas. More than 60 councils throughout England will be 'fast tracking' the set up of the Mortgage Rescue scheme and will start taking applications from the beginning of December. The scheme will help up to 6,000 of the most vulnerable households avoid the trauma of repossession over the next two years.
• Enhancing the Mortgage Rescue scheme to cover vulnerable families at risk of repossession because of additional loans secured on their home. Often families are more likely to default on these loans because of higher interest rates.
• Announcing a further £15.85 million to extend free debt advice to be made available to all consumers across the country.
• Increasing the support available for those eligible households paying the interest on their mortgages. Under new changes to the Support for Mortgage Interest scheme, the capital limit on which eligibility for assistance is calculated will be doubled to £200,000 and the standard interest rate for this support will be frozen at the current rate of 6.08 per cent - ensuring those with higher value loans and on fixed rate mortgages don't miss out.
• New action on second charge lending. The Office of Fair Trading will bring forward new sector guidance early next year to help ensure borrowers are treated sympathetically and second charge lenders do everything possible to avoid repossessions.

Housing Minister Margaret Beckett said:

"We are determined to do everything possible to provide real help now to homeowners facing tough times, and that means doing all we can to ensure repossession is always a last resort.

"It is our priority to make sure that hard working homeowners who suffer a loss of income through no fault of their own have the option to stay in their homes. The new measures announced today will expand the support available to those who need it most.

"Everyone needs to do their bit to help families avoid the traumatic impact of repossession, and we expect lenders to do more to build on work already underway to help their customers."

Consumer Affairs Minister Gareth Thomas said:

"We want to make sure that homeowners with second loans secured on their home get a fair deal.

"We will create a new framework of minimum standards for responsible behaviour by firms throughout the life of a loan - from the decision to lend money, through ongoing relationships with customers, to what happens when things go wrong."

The measures announced today follow a number of actions the Government has already taken to help families at risk of repossession including;

• A new mortgage pre-action protocol, introduced by the Civil Justice Council, came into effect last week. The new protocol makes clear that repossessions should be a last resort. Lenders are expected to discuss and agree with borrowers alternatives to repossession.
• New support measures to help vulnerable homeowners meet their mortgage interest payments. The DWP is reforming Income Support for Mortgage Interest (SMI), by shortening the waiting period before SMI is paid from 39 weeks to 13 weeks for new working age claims. This will come into effect from 5 January 2009.
• Expanded free legal representation in county courts for households at risk of repossession. There are now government-funded court desks providing free legal representation at repossession hearings, in nearly all county courts. These are successful in preventing immediate repossession in up to 85 per cent of cases when people attend court.
• A £10 million package to increase the provision of legal services already in place to offer advice to households in difficult financial circumstances. Services include face to face debt and financial advice, a national debt helpline and homelessness prevention work by every local authority.

Notes

1. Under the £200 million Mortgage Rescue scheme, eligible home owners will be offered either a shared equity option, enabling monthly mortgage payments to be reduced, or the option to sell their house to a housing association and remain in the property as a tenant paying subsidised rent. The scheme is expected to be up and running in full in the New Year.

Local authority involvement in the Mortgage Rescue scheme is voluntary. A full list of 'fast track' authorities is below.

South West

Salisbury (SW)
Penwith
Plymouth
Sedgemoor
Weymouth

South East

Cherwell (SE)
Tunbridge Wells (SE)
Tambridge and Malling (SE)
Slough (SE)
Maidstone (SE)
Dartford
Shepway
Eastbourne
Portsmouth
Rother
Gosport
Guildford
Adur
Worthing
Wycombe
Wealden
Slough (SE)

London

Lewisham (LON)
Waltham Forest
Westminster City Council
Havering
Greenwich
Harrow
Hillingdon

East

Broadland
Bedford
Basildon
Fenland
Mid Beds
East Mids
Northampton (EM)
Leicester (EM)
Rutland

West Mids

Solihull (WM)
Warwick
Worcester
Walsall

North West

Wigan (NW)
Preston (NW)
Oldham (NW)
Elsemere Port and Neston
St. Helens
Wirral
Blackpool
Knowsley
Traffod
Manchester (NW)
Ribble Valley

Yorkshire Humber

Doncaster
Scarborough (Y/H)

North East

Stockton (NE)
North Tyneside
Darlington
Middlesborough

2. For more information on changes to ISMI, please contact DWP press office.

3. For more information on additional funding for debt advice and new action on second charge lender, contact BERR press office.