Minister urges early debt advice

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Housing minister Margaret Beckett has urged homeowners to go to their lenders for debt advice.

Speaking on the BBC on Thursday, Beckett outlined the government's latest measures to help homeowners avoid repossession, announced on Wednesday by Gordon Brown in the Commons.

The government intends to defer a proportion of mortgage payments for up to two years, to help families during the economic downturn.

Eight of the UK's major lenders have already agreed to the scheme, which would be covered by a government guarantee.

Brown explained that the deal will mean more affordable monthly payments for households.

The prime minister also stated that government-owned lenders Northern Rock and Bradford and Bingley had joined Lloyds TSB in agreeing that no repossession proceedings would be started until households found themselves six months behind on payments.

He urged other "responsible banks" to sign up for the scheme and follow government's lead.

HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays and the HSBC have already signed up to the government-backed scheme.

These lenders are responsible for almost three-quarters of the home loans held in the UK.

And on Wednesday Beckett estimated that around 9,000 people will benefit from the government's plan to help homeowners postpone mortgage payments.

But on Thursday she told the BBC that the government could not guarantee everybody against the risks.

She said: "One of the reasons for doing this was to encourage people to go to their lenders and get debt advice. Some people faced with this horrendous threat to their lives, the way they live their lives, they just kind of shut down. They don't talk to anybody until it is almost too late.

"That is the last thing that they should do," she added.

Beckett explained that the government had been concerned that there was a group in society that no previous measures had helped.

"We were concerned all the way through that there was a group of people for whom none of this would help because they hadn't actually lost their employment but they had lost income through no fault of their own," she said.

"They are struggling to make the payments and there is nothing that we could already do help them other than the lenders, who were in talks with us, have extended the period of time in which they can renegotiate with the lenders before action is taken."

She said that the new mortgage scheme was "not a blank cheque" but would be "substantial help" for this group in society.

But she admitted: "Sadly, there may be a situation where people have second charges and so on that take them into a field where the help that we give, as substantial as it may be, will not be enough to save them.

"We can't guarantee everybody. But we are trying to help the hard working person, who wants to pay their mortgage, who isn't trying to default and is really struggling."

She explained that the government's package would also make it interesting for the lender to be "more generous and more understanding".

The housing minister explained that the average figure for the cost of a repossession is £35,000.

"That is how much money it costs the banks to repossess a house," she said.
Furthermore, it was claimed that repossession figures could rise to about 75,000 next year.

"Instinctively, I think there is almost bound to be a greater degree of caution and risk aversion," Beckett stated.

"Everybody I think was perhaps over-optimistic about the degree of risk that people were running."

She added: "One of the main reasons for what we are doing, what we are announcing, is that because clearly there is a terrible fear out there of people losing their homes. It is completely understandable but hopefully it is not justified to that degree."