The UK mortgage market is still struggling. Many homeowners are still finding it difficult to repay their mortgages on time due to job losses and talk of recession. Thousands of houses have been repossessed already and the UK government desires to extend the aid they have been offering since the last part of 2008.
The households receiving help will be able to reduce their interest rate by two thirds for 13 weeks. This allows for the payee to pay more towards their principle balance on the loan and less towards high interest. The changes to the government aid option will help a family with a £200,000 mortgage to get help. The previous bail out permitted only those with £100,000 mortgages to apply.
It is estimated the new changes will help over 230,000 families. These families may also find income support or allowances for those seeking employment due to job loss. The estimated payments for this allowance are £40 per week.
James Purnell in the work and pensions position stated help needed to be offered. He felt more people needed aid due to the ever increasing unemployment and repossessions occurring. The changes were passed through the government process with speed to enable quick assistance to those in need. It will also help individuals suffering from job loss to find a position with alacrity.
Last year repossessions rose by more than 32,000 just by September. While the end of year total has not been released yet most officials expect total repossessions to be around 45,000 homes. The conditions have yet to improve and are expected to become worse in the first half of 2009. Estimates of 75,000 home repossessions in 2009 were made. This number brought fear to the government and banking sectors demanding that something be done to improve the plights of consumers.
The mortgage scheme will not last the entire year of 2009, but is set to help the most in need for the next few months. The government has even been considering a proposal to help homeowners with £400,000 in mortgages. The proposal for this scheme would defer a section of their mortgage for two years. In other words they would not pay interest on a portion of the mortgage for up to two years. There are heavy restrictions on this proposal, such as people who do not claim benefits will be the only ones to be covered.
For families seeking remortgages or to buy a home this year it will be equally tough to find a lender. It is not impossible though. The government and banking sector has offered tighter criteria for lending, but will not stop the mortgage sector completely. They are looking for an infusion of cash to support the sector, but are unwilling to take the risks which brought on the credit crisis. The new criterion asks for better credit scores, higher down payments, and low risk. The mortgage companies are looking to a small group of securely employed individuals to seek mortgages. In fact Shelter considers this small group to be of the upmost importance to 2009.