My Lords, we anticipate that home owners’ mortgage support will help tens of thousands of households to avoid the threat of repossession. The scheme may cost up to £44 million over eight years, which includes the potential cost to government of guaranteeing the 80 per cent of interest deferred by borrowers who subsequently default in the guarantee period. If fewer home owners default, the cost could be much lower.
My Lords, I am grateful to my noble friend for her Answer. Will she say a little more about the sort of people who will benefit and the ways in which they will benefit as a result of this scheme? Secondly, will she say something about those lenders who are not prepared to join the scheme and what can be done about them?
Yes, my Lords, I am happy to answer both those questions. With this scheme we are trying to help those people who have suffered an income shock and who need short-term breathing space to get their finances back on track. There are few greater anxieties than the threat of losing one's home and all that goes with it such as the loss of a job, family break-up and the rest. The people who will be helped by the scheme will be households that previously relied on two incomes where one person has lost a job or a single person who has had overtime hours cut. I stress that it is not a payment holiday: a proportion of the interest payments will be deferred, but they will have to be paid back later.
The group of lenders who are taking part in the government guarantee scheme cover 50 per cent of the mortgage market. Four other high street lenders—Barclays, HSBC, Nationwide and Santander—have also confirmed that they will offer comparable arrangements to HMS to their customers, but they do not feel that they need the government guarantee. That will account for 80 per cent of the mortgage market.
My Lords, will the Minister confirm that only one building society has agreed to join the Government’s formal scheme? The other remaining building societies feel that it is not necessary to enter the government scheme: they hope to match that scheme for their customers on a voluntary basis.
My Lords, the building societies that are in the government scheme include the Bradford & Bingley and the Cumberland Building Society. Certainly, we want to go on working with as many building societies, banks and specialist lenders to bring as many people as possible into the scheme. That would be our intention.
My Lords, this is the third scheme that has been introduced by the present housing Minister—the right honourable Margaret Beckett. How do the Government intend to review the scheme to see how well it is working? Will the Minister particularly say whether the Government will look at borrowers from the 20 per cent who are not taking part in the scheme? Have they monitored the other schemes, as they have brought in one after the other?
My Lords, it is true that we have introduced a number of schemes to suit different types of situation. For example, the mortgage rescue scheme, about which the noble Baroness knows, is for the most vulnerable. It will help 6,000 potentially very vulnerable people move to shared equity or into the rented sector. Essentially, that will be monitored by looking at the lenders’ use of forbearance, which is considered through the home finance forum chaired by my noble friend Lord Myners. That is also working to improve the availability of data.
As for the 20 per cent who are outside the scheme, as I said in reply to a previous question, we will try very hard to bring in as many people as possible, but we have no targets for the scheme. We want to make it as generous and effective as possible for people who may be in difficulty.
My Lords, the House is well aware that this is a product of the credit crunch. Very many people are finding themselves vulnerable who did not expect to be either because they have lost their jobs or because they have difficulties with their mortgages.
My Lords, I greatly welcome the home owner mortgage support scheme, but there is clearly a danger that it will become a damp squib. Will the Minister consider whether it is necessary to give the courts more power to impose a stay of execution for possession orders where there is a good chance of people repaying their mortgages? In those cases where the lenders take very little notice of the excellent scheme now on offer, remembering that in every case they can use their discretion, would those extra powers not give us a better guarantee that repossessions will in fact be reduced as a result of this measure?
My Lords, the noble Lord has raised a very interesting point. Let me say something about the notion that this is a damp squib. I think one of the ways in which we could certainly accelerate and improve take-up is to make sure, as we are doing, that people who are in need have access to advice. The whole foundation of this scheme is that people in need should go to their lenders and should also take independent financial advice. That would help enormously. Certainly, as the noble Lord will know, we have boosted the court desks; we have made more advice available. The idea that we should look to extend the stay of execution is something that I shall take back to the department.
My Lords, following the question of the noble Lord, Lord Best, is it not the case that extensive powers are already vested in judges under Section 36 of the Administration of Justice Act 1970? These powers allow the judge to postpone an application or, indeed, suspend a possession warrant, where there is a possibility that a family will be able to pay and repay all debts within the total period of the mortgage. That is very important, for however parlous the situation might be now, if the mortgage has 20 years to run, it may very well be that that can be achieved within the terms of that provision.
My Lords, I am very grateful for the noble Lord’s advice. He has enormous experience in this area. Clearly, repossession is not inevitable, even after a claim has been issued. Provided the borrower is able to pay their arrears in a reasonable period of time, or place the property on the market to effect a sale, and the lender does not have satisfactory reasons for not agreeing, the court does have the power to adjourn the proceedings. So there clearly are different ways of easing this situation.
My Lords, even the impact assessment of the Department for Communities and Local Government is not as optimistic as the Minister. It says that only 7,000—not tens of thousands—might be helped every year. Is it not the case that, not only are the criteria for qualifying for the scheme too restricted, but even if a home owner can qualify, more than half the mortgage lenders have refused to have anything to do with the scheme?
My Lords, I think the noble Lord may be thinking about the mortgage rescue scheme, because that is certainly a figure in that range. We have estimated—these figures are based on our discussions with lenders, which have been very close partners in designing this scheme and the criteria we have set for eligibility— that up to 42,000 households could enter onto HMS in the next two years. If we were to be able to get 100 per cent of the mortgage market—if that was covered—then we would be looking at 85,000 people. As I have already explained, we have enough lenders to account for 80 per cent of the mortgage market. Of course, we have done a great deal, not just through this initiative but through the whole range of initiatives, in providing advice and supporting people in different degrees of difficulty, both before and after the Budget.