MercoPress. South Atlantic News Agency

UK mortgage market receives £ 1 billion to stem repossessions

British Primer Minister Gordon Brown has moved to stem growing repossessions with a £1 billion package to allow struggling homeowners to defer mortgage payments for up to two years.

Eight major lenders, accounting for about 70% of the UK mortgage market, have signed up to the plan to help those hit by a sudden drop in the family finances. Targeted at middle earners as part of wider British government efforts to shore up confidence in the economy, it will be available on mortgages worth up to about £400,000. The move was announced to the Commons by the Prime Minister in addition to an economy-focused legislative programme set out in the Queen's Speech. The mortgage plan will be available from early next year to those hit by a significant and temporary decline in their finances, through redundancy or a shortage of overtime, for example. Customers of HBOS, Abbey, Nationwide, Lloyds TSB, Northern Rock, Barclays, Royal Bank of Scotland and HSBC will be able to negotiate deferrals of their loan interest payments. The Government hopes more banks will in time join the scheme, under which the Treasury will guarantee all the payments that are deferred. Officials expect liabilities to reach about £1 billion and losses - through borrowers' ultimate failure to pay - to be about £100 million. The move is particularly aimed at middle income families. Single earner households with mortgages worth up to £200,000 who lose income already get payments covered. Mr Brown also announced Government-owned lenders Northern Rock and Bradford and Bingley would not begin repossession proceedings until households were six months in arrears. The London press reported that the Council of Mortgage Lenders informed government that the number of homes that are repossessed in the UK could soar to 75,000 next year. The figure would be well up on predictions that 45,000 homes could be repossessed this year, while it would be nearly as high as during the housing market crash in 1991. However the CML said it had not yet finalised its predictions for repossession numbers for 2009, adding that it was deliberately holding off doing so while new policy initiatives in the area were being announced. UK repossession levels are increasing in the face of the economic downturn and rising unemployment, with 11,300 people losing their homes during the third quarter of the year, 12% more than during the previous three months.