'Mortgage holidays' confusion puts senior ministers on the spot

Published on Thursday 4 December 2008 22:01

MINISTERS yesterday faced demands for more details of how Gordon Brown's flagship "mortgage holiday" would work, after the announcement sparked confusion.

Leading banks said they had not signed up for the Prime Minister's rescue package, amid reports the policy had been cobbled together and changed at the last minute.

Nationwide and Northern Rock both indicated they had not committed themselves yet, saying they were awaiting further details. Barclays and Royal Bank of Scotland also stressed they had not rubber-stamped plans.

The Treasury said the eight largest lenders had pledged to work with the government but admitted it was "working through arrangements with them and expect to announce the details shortly".

Lord Mandelson, the Business Secretary, was more emphatic about the banks' support. "The banks know very well what actions the government is taking, what responses we expect," he said.

Many lenders have said the initiative would simply be a continuation of the work they already did with borrowers who were in difficulty to help them stay in their homes.

But economists warned the move would not end the housing market downturn.

Margaret Beckett, the housing minister, added to the confusion by refusing to say how many households would be affected.

The deferred payment scheme is designed to help those who do not qualify for other government help and lose income either through redundancy or a reduction in their hours. It will cover mortgages up to 400,000.

Any missed payments will be added to their outstanding mortgage, which the borrower will pay off when their finances improve. The move could leave the government with liabilities of about 1 billion, as it has guaranteed that lenders will not lose money if borrowers are later unable to repay the debt.