Lenders' actions, supported by debt advice, help develop affordable repayment plans for borrowers committed to getting through short term financial difficulties.
Repossession is a last resort. Lenders already show significant forbearance to borrowers facing temporary difficulties, to enable them to keep their homes where this is possible. This core principle is already underpinned by regulatory rules and industry guidance. Today's scheme is a helpful additional tool - although the CML does not expect that the guarantee will be triggered in many cases, as the scheme is aimed at borrowers who expect to be able to resolve their difficulties and resume full mortgage payments within a year or two.
Some lenders have confirmed their participation in the home-owner mortgage support scheme (HMS) under which the government will provide a guarantee in some circumstances against part of the risk of future loss that lenders face by allowing borrowers to under-pay on their mortgages for a temporary period. Other lenders have concluded that, while they support the principle of reasonable forbearance, they would prefer to help their borrowers outside the scheme and without calling on government financial support.
CML sees HMS as simply one means to an end. What matters is how lenders are working with their borrowers through periods of difficulty where they believe these can be resolved, not whether they are using HMS in itself.
CML director general Michael Coogan commented: "Lenders are working strenuously to keep borrowers in their homes where they have a good prospect of being able to get back on track and sustain their home-ownership in the long term. The government is helping, through changes to Income Support for Mortgage Interest, the mortgage rescue scheme, and now the home-owner mortgage support scheme.
"Lenders fully recognise their responsibility to keep people in their homes where repossession can be avoided. The fact that some lenders are utilising the new scheme and others are not indicates simply a difference in their approach to forbearance, not in their commitment to it."
“It is likely to be some months before it will be possible to assess the impact of the various industry and government measures. The CML expects to be able to update its forecasts on arrears and repossessions, taking into account these measures as well as the prospects for employment and the wider economy, over the summer. Current forecasts are for 75,000 repossessions this year and 500,000 mortgages in arrears of three months or more at the end of the year.”
