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Tories want mortgage plan details Mandelson pressured on bank deal
(about 8 hours later)
The Conservatives say they want more details about the government's plan to help people in danger of repossession. Lord Mandelson has failed to quell claims the government has yet to reach a deal with the banks over its mortgage interest relief plan.
The housing minister Margaret Beckett has estimated about 9,000 homeowners would benefit from the scheme but told the BBC it would not protect everyone. The business secretary told BBC News the government was "working together" with the banks on the plan.
The Council of Mortgage Lenders estimates there could be 75,000 repossessions next year. But pressed repeatedly on whether they had reached a deal yet, Lord Mandelson declined to comment.
Under the government's plan, people could defer part of their mortgage interest payments for up to two years.Under the government's plan, people could defer part of their mortgage interest payments for up to two years.
Conservative front bencher Dominic Grieve said: "The difficulty with the government's proposals is that it's very difficult to know how many people are going to be benefiting.
"Until we can get clarity we can't really come out and say 'this is wonderful', because at the moment, quite frankly, we can't tell."
Breathing space
The plan is designed to give extended breathing space to those who lose their jobs or suffer a big cut in income, if they are facing repossession.The plan is designed to give extended breathing space to those who lose their jobs or suffer a big cut in income, if they are facing repossession.
The scheme will cover mortgages worth up to £400,000, the BBC understands.The scheme will cover mortgages worth up to £400,000, the BBC understands.
What's happened today is that the prime minster has made it less of a financial strain for the bank to leave the slightly stretched in their home Robert Peston class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/12/repossession_bailouts.html">Read more from Robert Peston class="" href="/1/hi/business/7763378.stm">Q&A: Mortgage plan class="" href="/1/hi/uk/7763692.stm">Reaction to help plan 'Working together'
The lender and homeowner will agree on the proportion of payment to be deferred, but it could be up to 100%.The lender and homeowner will agree on the proportion of payment to be deferred, but it could be up to 100%.
The prime minister told MPs the eight major mortgage lenders had signed up to the plan, which will start early in the new year and is meant to cut the risk of homes being repossessed. What's happened today is that the prime minster has made it less of a financial strain for the bank to leave the slightly stretched in their home Robert Peston class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/12/repossession_bailouts.html">Read more from Robert Peston class="" href="/1/hi/business/7763378.stm">Q&A: Mortgage plan class="" href="/1/hi/uk/7763692.stm">Reaction to help plan
It comes amid predictions repossession numbers could rise to 75,000 next year. The housing minister Margaret Beckett has estimated about 9,000 homeowners would benefit from the scheme but told the BBC it would not protect everyone.
Announcing the scheme on Thursday, during a debate on the Queen's Speech, Prime Minister Gordon Brown said eight of the major mortgage lenders had signed up to the scheme, which is due to start in the new year.
But the Conservatives said two banks said to be committed to the plan - Lloyds TSB and HBOS - had not yet agreed to the details of the scheme.
Tackled about how whether the government had reached a deal with the banks, Lord Mandelson said: "The banks know very well what actions the government is taking, what responses we expect. We are working together.
"There is no point in working against each other in this situation. We have to work together to work through these problems and that's what we are doing."
But he declined to confirm a deal had been reached.
It comes amid predictions repossession numbers could rise to 75,000 next year - higher than the level seen during the last recession in 1991.
Mrs Beckett told BBC Radio 4's Today programme the scheme did not mean no-one would lose their homes.Mrs Beckett told BBC Radio 4's Today programme the scheme did not mean no-one would lose their homes.
No guaranteeNo guarantee
"Sadly there will be some people who perhaps have second charges and so on which take them into a field where even the help we can give, substantial though it may be, won't be enough to save them," she said."Sadly there will be some people who perhaps have second charges and so on which take them into a field where even the help we can give, substantial though it may be, won't be enough to save them," she said.
"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 but is really struggling.""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 but is really struggling."
She said some people, faced with the threat of repossession, "kind of shut down and don't talk to anybody until it's too late" - the government wanted to encourage them to talk to their lenders.She said some people, faced with the threat of repossession, "kind of shut down and don't talk to anybody until it's too late" - the government wanted to encourage them to talk to their lenders.
HAVE YOUR SAYThose of us that lose our jobs won't be entitled to help with the rent, because of our hard earned savings, and those of us that keep our jobs now have to pay the mortgages of those that took the gamble to buy and lost. Richard, WorcesterSend us your commentsThere was "clearly a terrible fear out there of people losing their homes" which was understandable, but not "justified to that degree". HAVE YOUR SAYThose of us that lose our jobs won't be entitled to help with the rent, because of our hard earned savings, and those of us that keep our jobs now have to pay the mortgages of those that took the gamble to buy and lost. Richard, WorcesterSend us your comments There was "clearly a terrible fear out there of people losing their homes" which was understandable, but not "justified to that degree".
The scheme would make it "more in the interests of lenders to be more generous and understanding".The scheme would make it "more in the interests of lenders to be more generous and understanding".
Asked again how many people would take it up, she said it was "genuinely quite hard to judge" - having earlier said an estimate from lenders suggested it would be only 9,000 homeowners.Asked again how many people would take it up, she said it was "genuinely quite hard to judge" - having earlier said an estimate from lenders suggested it would be only 9,000 homeowners.
"It's very much on a case by case basis," she added."It's very much on a case by case basis," she added.
Repossession delayRepossession delay
She said it was aimed at people who were not eligible for other forms of government help, such as income support, as they had not lost their jobs but, for example, their partner had and they were struggling with repayments.She said it was aimed at people who were not eligible for other forms of government help, such as income support, as they had not lost their jobs but, for example, their partner had and they were struggling with repayments.
People could also convert a repayment mortgage into an interest-only loan to take advantage of the scheme.People could also convert a repayment mortgage into an interest-only loan to take advantage of the scheme.
On Wednesday Mr Brown also announced government-owned lenders Northern Rock and Bradford and Bingley had followed RBS's lead in agreeing that repossession proceedings would not begin in any case until households were six months behind on their payments.On Wednesday Mr Brown also announced government-owned lenders Northern Rock and Bradford and Bingley had followed RBS's lead in agreeing that repossession proceedings would not begin in any case until households were six months behind on their payments.
As always with Gordon Brown, don't just look at the headline, look at the detail George OsborneShadow chancellorAs always with Gordon Brown, don't just look at the headline, look at the detail George OsborneShadow chancellor
Currently, those on benefits have their mortgage interest payments covered for two years if their mortgage is below £200,000.Currently, those on benefits have their mortgage interest payments covered for two years if their mortgage is below £200,000.
The government's plan is effectively a government mortgage insurance scheme, which will work by the Treasury underwriting the extra risk that banks take.The government's plan is effectively a government mortgage insurance scheme, which will work by the Treasury underwriting the extra risk that banks take.
The banks will not need any extra capital to cover the extended risk of people defaulting on their mortgages.The banks will not need any extra capital to cover the extended risk of people defaulting on their mortgages.
In the worst-case scenario, it is thought the government would be exposed to £1bn in risk, with the cost to the taxpayer likely to be about £100m, government sources suggest.In the worst-case scenario, it is thought the government would be exposed to £1bn in risk, with the cost to the taxpayer likely to be about £100m, government sources suggest.
Question of detail
BBC business editor Robert Peston said it was a "clever" scheme and "most banks will give it a go because they don't want to be seen to be turfing people out of their homes".
However, he indicated some banks did not believe it would have much of an impact.
Shadow chancellor George Osborne said he would not comment until he had studied the announcement, which was not in the Queen's Speech, more fully.
"As always with Gordon Brown, don't just look at the headline, look at the detail," he said.
The Tories said later that two banks said to be committed to the plan - Lloyds TSB and HBOS - had not yet agreed to the details of the scheme.
Liberal Democrat treasury spokesman Vince Cable said he believed the plan would be a "positive step" in helping to slow down the repossessions process.Liberal Democrat treasury spokesman Vince Cable said he believed the plan would be a "positive step" in helping to slow down the repossessions process.
But he warned that people must study the small print to see who would benefit and what knock-on effect the plan would have on banks' wider lending policies.But he warned that people must study the small print to see who would benefit and what knock-on effect the plan would have on banks' wider lending policies.
The Council of Mortgage Lenders (CML) said on Wednesday that it estimated repossessions would rise sharply to 75,000 next year, as many as during the peak of the last recession in 1991.