The Chancellor today tried to avert a repossessions crisis by telling banks to do more to aid struggling homeowners.
Alistair Darling and Housing Minister Caroline Flint called on the major lenders to give more time to families who fall behind with their mortgages.
Mr Darling was making clear at a specially convened meeting that taxpayers were ‘entitled to expect’ that benefits from the £50bn cash injection to the banking system by the Bank of England would be handed on to consumers.
Repossessions are running at a third the level of the last big housing crisis in 1991 but are rising. Last year 27,000 families lost their homes, an increase of 21% from 2006 and over triple the 2003 figure of 8,500.
A study by the Lib-Dems claimed 60,000 homes were at risk. Mr Darling is concerned lenders have raised the cost of borrowing for many homebuyers despite three cuts in base rates. Where people struggle to pay their monthly mortgage bills, he wants lenders to offer immediate help and advice, including easier terms where appropriate.
Borrowers could be given ‘mortgage holidays’ where their payments are suspended for a period. Others could have the debt spread over a longer period, allowing a reduction in payment.
Banks and building societies say they have always offered such help to avoid having to repossess homes but are willing to go further. Some industry experts say the real danger of repossessions is posed by less scrupulous lenders who give consolidating loans secured on property to families with big debts.