The UK Homeowners Mortgage Support Scheme, which allows hard-pressed households to defer repayments for up to two years, needed clearance from Brussels under EU rules on fair competition.
Competition Commissioner Neelie Kroes said the aid measure was aimed at "well-defined objectives of common interest", and was well designed to deliver them while limiting the impact on fair competition in the housing sector.
"The Support Scheme aims at helping UK households that are at risk of falling behind on their mortgage payments to keep their family home.
"It is appropriate that, in the midst of the current financial crisis, help is given not just to banks but also directly to individuals that are in difficulty as a result of the downturn".
The Government notified the Commission last month that is was planning safeguards enabling borrowers facing drops in income to reduce their monthly payments - potentially deferring payments on the whole of the principal sum and up to 70% of interest repayments for up to two years.
A Commission statement said the scheme was approved under EU rules because "it provides an aid of a social character to individuals affected by a temporary income shock and at risk of losing their home, on a non-discriminatory basis".
