Q&A: How the Homeowners Mortgage Support Scheme works

The Homeowner Mortgage Support Scheme, announced by Gordon Brown in December, was supposed to help all homeowners - however some of Britain’s biggest lenders have declined to participate.

Q: What is the scheme?

A: It is designed to give support to those who have experienced a sudden drop in income or if a homeowner has been made redundant. Households at risk of repossession can defer up to 70 per cent of the interest on their monthly mortgage payments for up to two years, if their lender has signed up to the scheme.

Halifax, which is taking part in the scheme, said yesterday that a borrower with a mortgage of £100,000 with a fixed rate of 4.5 per cent who participates in the scheme could pay as little as £110 a month. The same mortgage would cost £630 a month on a full repayment basis.

Q: Which lenders are offering it?

A: So far, taxpayer backed Lloyds Banking Group, which owns Halifax, and Royal Bank of Scotland, which includes Natwest, have signed up. Northern Rock, the nationalised bank, and Bradford and Bingley, which has had the government take over its mortgage business, are also on board and will offer the scheme from today.

National Australia Bank, which owns the Clydesdale and Yorkshire banks, plus Cumberland Building Society are also participating.

Other lenders have announced they will join the scheme at a later date, including Bank of Ireland, Kensington, GMAC, GE Money, the Post Office and Standard Life Bank.

Lenders that participate will have the security of a Government guarantee if the borrower defaults.

Q: Who qualifies?

A: Borrowers who bought their home before December 1, 2008, are owner-occupiers, and have an outstanding mortgage of less than £400,000 and savings of less than £16,000.

According to the Government, the scheme applies to “borrowers who suffer a temporary loss of income ... to help them get back on track with their finances.”

You must also prove you have talked through “other options” with your lender, and have been making regular payments for at least five months and have sought independent financial advice.

Q: Can you avoid paying back your mortgage altogether?

A: This is payment deferred, not cancelled. The money will be added back on to the debt at a later date.

Q: Are there any exceptions?

A: You can't apply if you own more than one home – for instance if you are a buy to let borrower. You are also disqualified if you are unlikely to ever again earn an income similar to your previous wage or if your lender believes you are unable to meet the reduced repayments.

Those with mortgage payment protection insurance are also ineligible, as are those claiming Jobseeker's allowance, in which case you can claim for support for mortgage interest.

Q: What if my lender hasn't joined the scheme?

A: Lenders that have chosen not to sign up to the scheme include HSBC and Abbey, which have significantly grown their share of the mortgage market since the start of the credit crunch. Nationwide, the UK’s biggest building society has also declined to take part, as has Barclays, owner of Woolwich and First Plus.

They have pledged to make “comparable arrangements” and will be relying on their own procedures for helping those in trouble.