Ok,

So lets pick appart the new mortgage scheme announced by Gordon Brown.

1) None of the baks have given agreement whatsoever. They have meerly agreed in principle.

With further investigation it looks very much like Grodon rushed in to this new ’scheme’. Not only did Labour rush into the planning of the scheme but also announced it before the details were actually finalised by all parties. Will this scheme ever materialise and if it does exactly what form will it be in - time will tell.

2) Borrowers with a second charge on their property will not qualify for the scheme.

People with a second charge on their property usually relates to a loan of somekind. This is likely to be in one of two main forms - secured loans or bank guarantees. People who have taken out a secured loan are more likely to need the help than those who haven’t ( VERY GENERAL comment ) and I fail to see why they should not be included ion the scheme - are they not as much at risk?

3) The subprime lenders have not joined and look very unliely to do so.

This is the most distressing of all points. The sector of the British mortgage market at most risk of repossesions during the credit crunch is the subprime market.

This is for two reasons

i) Their mortgages repayments are much more expensive
ii) When their fixed rate deals ( or other forms of mortgage introduction rates ) end they will be forced either to stay on the standard variable rate or to take potentially even more expensive mortgages ( due to the lack of cheap mortgages available in the British mortgage market today ).

Conclusion

If something looks too good to be true it usally is! In my opinion this new scheme is simply a very impressive piece of spin doctoring. This scheme is unliely to actually help many homeowners at all and is likely to have a very small effect on the numbers of repossesions likely to be observed during the coming months.

For more detailed information please read the article below from

www.timesonline.co.uk

Mortgage scheme rules likely to limit householders’ help

Homeowners hoping to avoid repossession under the Government’s “mortgage holiday” proposals must meet a series of qualifying criteria that could mean fewer than 10,000 are likely to join the scheme.

The Homeowner Mortgage Support Scheme, which was announced last week by Gordon Brown, offers households that suffer a “significant and temporary loss of income” as a result of the recession the chance to defer a proportion of the interest payments on their mortgage for up to two years.

Yesterday the Treasury said that the scheme would be open only to households with a mortgage of less than £400,000, estimated to be about ten million borrowers.

About 1.7 million households will not qualify, including borrowers with a second charge against their home and those with a buy-to-let deal.

Borrowers who apply can also hold no more than £16,000 in savings and will need to already be in arrears on their monthly payments. It was also revealed that borrowers would be required to speak to a debt adviser, such as National Debtline or Citizens Advice, before approaching their lender.

Debt charities will be expected to assess whether a homeowner qualifies and to establish whether they will be able to begin repaying the debt in the near future. However, the final decision will rest with the lender.

The Chancellor announced an extra £15 million for debt charities in the Pre-Budget Report. Approximately £5 million is going to the Money Advice Trust, which runs the National Debtline. It will be recruiting another 50 debt advisers next month.

Last night it emerged that the UK’s eight biggest lenders, including HBOS — owner of Halifax — Abbey and HSBC had not offered concrete assurances that they would sign up to the scheme.

The lenders have agreed only “in principle” to the idea but are expected to come under further pressure at a meeting with ministers due today.

It is also estimated that sub-prime lenders, who are considered to be responsible for approximately half of all repossessions, will not join the scheme.

Last week Margaret Beckett, the Housing Minister, suggested that about 9,000 borrowers will take advantage of the scheme, despite estimates from the Council of Mortgage Lenders (CML), the trade body, that repossessions could top 75,000 next year.

There will be 200,000 households who are more than three months in arrears by the end of the year, according to the CML.

The Government is guaranteeing any loss experienced by lenders in the event that homeowners are not able to repay the interest that has been rolled forward.

Officials said that the Government’s liabilities if people defaulted en masse could be £1 billion. However, the Treasury estimates that the more likely cost will be about £100 million.

Currently, overstretched borrowers with mortgages below £200,000 have their interest payments covered for two years if they are on benefits under the Income Support for Mortgage Interest scheme.