The 15 bills in the Queen’s Speech are as dry as dust*.
But Alex and I have been told that Gordon Brown is about to reveal the big surprise.
The prime minister is going to give struggling homeowners the right to demand a mortgage holiday (for up to two years apparently) if one adult in the household loses his/her job. Eight banks have signed up to the agreement.
This goes far beyond the current situation where borrowers can ask for mortgage holidays and banks can tell them to get lost (unless they have a specific flexible mortgage).
This raises lots of questions: Have the banks already agreed? Are they unhappy? Will they be able to charge customers for doing this? How will it work in practice? Does it introduce ‘moral hazard’?
I’m told the cost is about £100m although the contingent liability could be more like £1bn.
The move is politically shrewd, however. It should put a damper on the rising wave of repossessions, just as unemployment is starting to increase.
The idea seems to be that lenders could cut interest rates or defer repayments completely for up to two years. A taxpayer guarantee would be given to reimburse lenders if borrowers are unable to resume repayments.
US federal agencies have recently looked at similar measures to curb the rising rates of repossessions in the US.
The move comes as the number of mortgage-holders falling behind on payments or being repossessed is rising at its fastest rate since the last recession.
The CML has predicted about 45,000 repossessions during the whole of 2008, up from about 30,000 last year. However, this is still below the last peak of 75,540,in 1991 – when 350,000 homeowners had fallen behind on mortgage payments by three months or more.
UPDATE: The PM has confirmed the agreement, although details still need to be hardened up. Anyone with a mortgage up to £400,000 and with under £16,000 of savings can apply. Mortgage payments will be reduced rather than frozen altogether. The reaction from charities, banks and home-owners seems overwhelmingly positive so far – even if the underlying problem remains the same as ever. Oh, and lenders covering 70 per cent of the market have signed up: the others have not.
* Equalities bill, constitutional renewal bill, “saving gateway accounts” bill, etc. Almost all had been trailed in the May draft speech. Some of the most interesting decisions taking place – such as Mandelson pushing ahead with flexible working rights for parents of older children – are not even in the draft bills
Jim Pickard
Kiran Stacey