Mortgage support scheme ‘complements measures already in place’

The homeowner mortgage support scheme proposed by the Government is a ‘well-intentioned move to help some borrowers in temporary financial difficulty’, the Council of Mortgage Lenders (CML) has stated, while pointing out that it won’t benefit all homeowners struggling to make their mortgage payments.

The CML also stressed that mortgage lenders are already helping people who are finding it hard to maintain their mortgage payments, as long as (to quote from the CML’s ‘news & views’ newsletter):

• the borrower is maintaining a constructive dialogue with the lender;
• full payments are likely to be restored after a temporary period of difficulty; and
• homeownership remains sustainable in the long run.

Moving on, the newsletter reminded people that the mortgage support scheme is by no means a ‘free lunch’: not just because it guarantees interest payments only (and so doesn’t affect the capital), but because deferring payment will add to the overall mortgage debt.

Extra risk for mortgage providers and borrowers When a homeowner is helped to stay in a home which they might not otherwise be able to afford, the negative consequences can affect mortgage provider and borrower alike.

Having more borrowers in arrears, for example, will reduce a mortgage provider’s ability to lend to new borrowers. And when property prices are falling, a delayed repossession can end up being more painful for borrower and lender alike, as the property will probably be worth less in the medium-term future than it would be today – resulting in a greater shortfall between the amount owed and the amount produced by the sale.

Tags: mortgage support scheme, mortgage, support, scheme, mortgages, mortgage advice

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