The new homeowner mortgage support scheme seems another example of the Chancellor Alastair Darling’s habit of announcing policy without thinking through the implications.
Prime Minister Gordon Brown first announced the scheme on December 3 and the Chancellor followed up with more details in his Pre-Budget Report.
Now, the Government seems to have cobbled together a policy that sounds great but will help virtually no one because the criteria for the scheme are so tight few homeowners will qualify and even if they do, mortgage lenders are not bound to give them, a mortgage holiday.
Experts believe about 9,000 homeowners may qualify for a mortgage break – while the City fears 75,000 will have their homes repossessed.
Despite the regular announcements about how the scheme may work, no one knows when it will start, who will act as independent advisors or whether the banks and building societies will actually operate the scheme.
The Treasury says some of the practical details were still being worked out.
The advantage of the new scheme for anyone eligible is that they will be able to stop repaying interest for two years.
Any unpaid interest will be added to the mortgage and have to be repaid once the borrower can afford to restart their payments, or when the two-year holiday period has ended - whichever comes first.
If the borrower still cannot afford their mortgage then the government will pay the lender the "equivalent sum of the total amount of the interest guaranteed that is not recoverable from equity in the property."
The main qualifications are that someone should have:
• Suffered a loss of income from employment or self-employment which makes full mortgage payments difficult, but which is not expected to be a permanent income loss
• Taken out a mortgage of up to £400,000
• Received financial advice from a party other than their lender to determine their eligibility for the scheme
