This time, with repossessions predicted to peak at worryingly high levels, the government have told lenders that they will underwrite people’s mortgage payments for up to two years if income is hit through redundancy or the general effects of the recession.
This will work for loans up to £400,000 and could help several thousand people. Basically, if you do fall into trouble you will need to negotiate with the lender to confirm how much you can pay, and the remainder is deferred – not waived – deferred for up to two years until you can pay again at the desired level.
It is not a perfect scheme, but it is a good one in principle.
Without seeing the full details it is hard to comment further, but there needs to be a careful mechanism to understand those that are genuinely hit and those that probably should never have borrowed what they did in the first place.
This will not halt repossessions completely, which many argue could be a bad thing as it firstly stores up trouble for later on, and secondly arguably stops the housing market from finding its own bottom level.
Personally, I think some kind of brake needed to be put on this, as the housing market could have overshot its natural floor, due to bad news and consumer sentiment.
As I have stated before, I believe the next six months represent the trough of house prices and with more rate cuts on their way, deals are there to be done now.