Brown aims to halt repossessions

7:58pm Wednesday 3rd December 2008

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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 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.