New support to help homeowners remain in their homes if they fall on difficult times was announced by Housing Minister, Margaret Beckett, in April. But what exactly does it cover?
Homeowners Mortgage Support (HMS) will enable eligible borrowers who suffer a temporary loss of income to cut their mortgage interest payments for up to two years to help them get back on track with their finances.
This new support will be available throughout the UK and builds on a range of measures the Government has already tried to put in place to ensure that repossession is always a last resort.
Who will offer it?
Lloyds Bank Group (including Halifax and Bank of Scotland), Northern Rock, the Royal Bank of Scotland (including NatWest and Ulster Bank), Bradford and Bingley, Cumberland Building Society, and the National Australia Bank Group (including its Clydesdale and Yorkshire Bank subsidiaries) have all announced they will offer their customers HMS.
A number of other banks, building societies and specialist lenders have also confirmed that they will offer their customers HMS as soon as possible. These include Bank of Ireland (which includes Bristol and West), GMAC, GE Money, Kensington Mortgages, the Post Office and Standard Life Bank.
All lenders offering HMS will have the security of a Government guarantee if the borrower defaults.
At the same time, four other high street lenders, Barclays (including First Plus), HSBC, Nationwide and Santander (including Abbey and Alliance and Leicester) have all said that they will offer comparable arrangements to HMS to their customers, while opting not to take up the Government guarantee. Customers of these companies experiencing a reduction in income and willing to make regular monthly payments will receive a similar level of support and be encouraged to seek independent money advice. Money advisers that have been trained to deliver Homeowners Mortgage Support advice include: Citizens Advice, Shelter, CCCS, National DebtLine and Payplan.
Enhanced support
The Government believes that lenders covering more than 80 per cent of the mortgage market will now be providing enhanced support to their customers, particularly as borrowers will receive independent money advice as part of these changes to help them make the right decisions for their circumstances. It will continue to work with smaller lenders to encourage as many as possible to offer HMS or comparable arrangements for their customers in the future.
"We know that many families are worried about how to pay the mortgage right now, and we're determined to ensure there is real help available for them,” says Beckett. “[HMS] is a result of excellent co-operation between Government, lenders, and money advice services.
"On top of the range of measures we've already put in place, this new support will help borrowers who just need a bit more time to get themselves back on their feet.
"The clear message to borrowers is to contact your lender straight away if you're concerned about how to pay the mortgage as often a solution can be found."
Deferred interest
HMS does not provide consumers with a payment holiday. The mortgage interest payments that have been deferred will eventually have to be paid back. This obviously needs to be carefully explained to clients so they understand what it could add up to. The enhanced support will be underpinned by FSA regulation and the Financial Services Ombudsman to ensure customers are treated fairly.
Since the autumn, the Government has put in place a range of measures aimed to give more protection to households at risk of repossession. This includes quicker and more extensive support to home owners who have lost their job, a scheme to enable the most vulnerable home owners to stay in their homes, and a major extension of free debt and legal advice as follows:
• Free legal and debt advice with £25 million invested to expand these services, including an additional £2.5 million to support HMS
• A new Pre-Action Protocol that requires lenders to prove that they have exhausted all options before seeking repossessionthrough the courts.
• Agreeing with lenders a three month minimum waiting period before lenders seek to repossess.
• More help for people who lose their jobs by reducing the waiting time for Support for Mortgage interest from 39 weeks to 13 weeks.
• A £200 million Mortgage Rescue Scheme to help the most vulnerable households avoid repossession.
Recent statistics show that, on average, each month more than 2,800 people in England and Wales who are at risk of losing their home, benefit from free, immediate legal advice and representation in Court, thanks to the Housing Possession Court Duty Scheme, run by the Legal Services Commission.
Duty advisers are available on days when repossession cases are heard and are available to anyone, regardless of their income, who has a hearing listed on that day. Almost 34,000 people across England and Wales used this service last year, an increase of more than 5000 compared to 2007.
What should clients do?
Borrowers who are interested in applying for Homeowners Mortgage Support, or finding out about comparable arrangements should contact their lender in their first instance to check their eligibility. For lenders offering HMS with the Government guarantee, the borrower must:
• Have bought their home before 1st December 2008;
• Be an owner-occupier - the scheme is not open to buy-to-let or investment properties
• Have an outstanding mortgage of less than £400 000 and having savings of less than £16 000.
• Have a regular household income and should be able to make a minimum contribution of 30% of the total interest payment
• Have talked through other options with their lender and have been making regular payments for at least five months.
• Have sought independent money advice.
TUC calls for redundancy changes
The TUC called on the Government to reduce the qualifying period for statutory redundancy pay (SRP) entitlement from two years to 12 months. Its research shows that more than 20 million employees across the UK could benefit from this step.
Currently, employees aged 16 or over are entitled to SRP after a two year qualifying period working for the same employer, so the youngest age at which an employee can benefit from redundancy pay is 18. TUC analysis of official statistics reveals that if this qualifying period was halved to one year then 20,543,000 employees would gain extra redundancy entitlement. Of these more than three million employees would be entitled to SRP for the first time - nearly one in eight (12.2 per cent) of the workforce. More than 17 million employees would increase their existing entitlement to SRP.
While older workers are most likely to be in the same job for more than one year, many younger employees would stand to gain SRP for the first time under the TUC's proposals. Nearly one in three (30.3 per cent) employees aged 17-19 and one in five (20.9 per cent) 20-24 year olds would gain.
Employees in every region across the UK would benefit from the reduced qualifying time for SRP. The nations and regions with the highest percentage of employees gaining are Northern Ireland (87.2 per cent), Wales (84.2 per cent) and the East of England (83.3 per cent).
TUC General Secretary Brendan Barber said: “We are seeing a return of mass unemployment to the UK. And the situation will get worse before it gets better, as unemployment always persists even after a recovery starts.
'Many employees will be facing redundancy and unemployment for the first time in their lives. There can be no assumption that the people who are losing their jobs will find it easy to get new ones, and they will need all the help they can get with redundancy pay, retraining and personal advice. The qualifying period for statutory redundancy pay should be cut to 12 months to help more employees across the UK cope with the financial costs of losing their jobs.”
The TUC is also calling on the Government to increase the amount of an employee's weekly earnings which counts to SRP from £350 to at least £500, and to ensure that future rises are in line with average earnings. Official statistics also show that 46.2 per cent of UK employees earn more than £350 a week, so nearly half of the workforce is losing out with a statutory limit of £350 for redundancy pay.
Nearly seven out of eight employees (83.1 per cent) would benefit if the TUC's proposal for reducing the minimum qualifying period for SRP is accepted. Nearly one in eight employees (12.2 per cent) would gain some redundancy protection for the first time and seven out of ten employees (70.9 per cent) would increase their existing entitlement.
