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The government today announced plans to help borrowers who are struggling to keep up with their mortgage repayments stay in their homes.
The plans, which were announced by the prime minister in a debate on this morning's Queen's speech, are aimed at middle-income borrowers and designed to slow the rising tide of repossessions as job losses and rising household costs push more and more households into mortgage arrears.
By the end of September, more than 30,000 homes had been repossessed, more than in the whole of last year, and the number is expected to rise further next year.
Under the scheme announced today by the prime minister households that have temporarily lost some or part of their income will be able to defer mortgage interest payments for up to two years.
Borrowers would speak to their lender and arrange a payment break, and at the end of the period the unpaid interest would be added to their outstanding mortgage.
If at that point they were unable to repay their loan, the government would step in to cover their missing payments.
It is unclear whether the borrowers with a repayment mortgage would be expected to continue to repay the capital on their loan while the interest is deferred.
Gordon Brown told the Commons: "The result will be more affordable monthly payments for homeowners who are needing a bridge through difficult times."
The prime minister said eight lenders had so far signed up to the scheme, including HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays and HSBC. Between them they represent around 70% of the mortgage market.
A spokesman for the Treasury said that by guaranteeing the payments in this way the government was encouraging banks to consider requests for payment breaks.
However, he added that lenders would need to take a commercial decision on each case, subject to guidelines on treating customers fairly outlined in the banking code.
He refused to confirm reports that the scheme would be available to borrowers with mortgages of up to £400,000, but said it was aimed at people who were not entitled to claim benefits.
Mortgage lenders welcomed the scheme, although they said there was still a lot of detail to be ironed out.
A spokeswoman for Nationwide said: "The government has approached us and we are more than happy to participate in a scheme of this sort. However we are unable to commit to a scheme until we have more details."
The Council of Mortgage Lenders said the scheme would not be for everyone and would not be "a charter for 'won't pay' borrowers to avoid their responsibilities".
"It will need careful development with lenders and the CML to ensure it is properly targeted to those borrowers committed to sustain their home ownership through short-term periods of financial difficulty," it added.
The government has been putting pressure on lenders to use repossession only as a last resort and has recently introduced a range of measures to help hard-pressed borrowers stay in their homes.
In last week's pre-budget report it confirmed plans to make benefits covering mortgage interest available more quickly to those who lose their jobs, reducing the waiting period from 39 to 13 weeks.
It also confirmed plans to allow borrowers entitled to benefits a similar interest deferral scheme.
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