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Mortgage lenders were last night demanding clarity on the fee they would be charged for the government's two-year guarantee on missed mortgage payments to help struggling homeowners.
At a meeting between the major banks and Alistair Darling and Lord Mandelson yesterday, the hastily announced scheme to give customers breathing space was discussed along with a number of other pressing issues affecting banks.
The chancellor and the business secretary will also have a number of top-level meetings with lenders next week as the government attempts to ensure that small businesses are not deprived of finance during the continuing economic crisis. Thrashing out the details of the scheme to help households affected by redundancy or a "significant loss of income" is vital for the lenders, who have been told to implement the package in the new year.
In working through the fine print of the scheme, the eight lenders - seven banks and one building society - which have signed up to the plan will be anxious for clarity on the price they will pay for the guarantee being provided by the government for missed interest payments.
The eight lenders represent 70% of the mortgage market, where there are concerns that as many as 75,000 homes could be repossessed next year as unemployment rises.
Gordon Brown, who stunned parliament with the announcement on Wednesday, yesterday made it clear more lenders should sign up. "The eight major lenders that are responsible for more than 70% of the mortgage market are fully behind the plans. We are now working on getting the remaining 30% signed up," Brown said.
The lenders were asked to support the scheme, which will cover mortgages up to £400,000 - but only those with less than £16,000 worth of savings will be eligible.
It will allow customers in difficulty to defer a proportion of the interest payments on their mortgage for up to two years. The deferred payments will be added to their outstanding mortgage debt, which the borrower will pay off when their finances improve. It could leave the government with liabilities of about £1bn.
Up to 9,000 homeowners could be helped by the scheme, which is being backed by HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS and HSBC, although housing minister Margaret Beckett said yesterday that it was "really genuinely quite hard to judge" how many applicants there might be.
Lenders are determined it should target people who "can't pay" rather than "won't pay". They had already been warned by the Financial Services Authority to treat customers having difficulty with mortgage payments with care.
Lenders such as Royal Bank of Scotland, which is 58% owned by the taxpayer, and state-owned Northern Rock, had also taken steps to try to avoid accusations of heavy-handedness by promising to wait six months before initiating the repossession process rather than the three-month industry norm.
The government is also putting pressure on credit card companies to treat customers fairly during the economic downturn. They have to draw up a new statement of principles to avoid an investigation by the Office of Fair Trading. This might include a "window" when card companies can move rates, and a potential limit on the size of rate rises. The business secretary, Lord Mandelson, is also demanding monthly data from banks on the amount of money they lend to small businesses.
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