Big banks: We haven't signed up to Brown's mortgage rescue plan

The Treasury yesterday claimed that the eight largest lenders, HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS and HSBC, had agreed to "support" the new scheme to help people avoid repossessions. But today, several privately distanced themselves from this statement, stressing that they had not yet signed up to the initiative.

A Nationwide source said: "The Government has approached us and we are more than happy to participate in exploring any potential solutions to the issues facing the market.

"At this stage, we are unable to comment on a particular scheme until we know more detail."

Northern Rock also stopped short of giving unequivocal backing.

A source at the nationalised bank said: "It would be wrong to say we have signed up to anything. It's a commitment to work with the Government through the detail."

Both Barclays and Royal Bank of Scotland also stressed they had not signed up to the proposal and the Treasury appeared to change its line slightly today, saying: "As we have said, the country's eight largest lenders have pledged to work with us to develop the scheme. We are now working through arrangements with them, and expect to announce full details shortly."

Business Secretary Lord Mandelson today declined to say that the banks were fully signed up to the scheme when questioned by the BBC. He said: "The banks know very well what actions the Government is taking, what responses we expect."

In what may be seen as a threat to lenders, he added: "We are working together. There is no point in working against each other in this situation."

He and Chancellor Alistair Darling held talks with bank chiefs this morning and discussed how the initiative could be introduced in the New Year.

But fresh doubts were also raised over how many homeowners will be saved from repossession after housing minister Margaret Beckett refused to say how many households would benefit.

She reportedly suggested yesterday that just 9,000 people would avoid having to give back the keys to their homes.This compares with an expected 75,000 repossessions next year.

But today Mrs Beckett said that banks would have to decide on a case by case basis who would be entitled to the bail out. She also suggested that the fall in house prices may soon be over.

"There are some indications, small ones, that we are getting towards the bottom," she told the BBC.

She also appeared to admit that the Government had encouraged irresponsible lending.

Under the plan, people hit by a significant temporary loss in their income could defer a proportion of the interest payments on their home loan for up to two years.

ITV News claimed that the scheme was radically changed in recent days and that some banks were given just a day's notice that it was being announced.

There were also reports, which have been denied, that Mr Darling and Lord Mandelson clashed over the proposal and that the Prime Minister decided at the last minute to go ahead with it.

The deferred payments, which will be underwritten by the taxpayer, will be added to outstanding mortgage debt, which the borrower will pay off when their finances improve.

The move could leave the Government with liabilities of about £1 billion. But officials expect the final bill to be around £100 million. The initiative is aimed at people who temporarily lose some or all of their income who may not qualify for other government help such as that given to unemployed households. It will cover mortgages up to £400,000.

The Department for Work and Pensions is also reforming income support for mortgage interest so that the benefit kicks in after 13 weeks for eligible homeowners and covers interest payments on mortgages of up to £200,000.

Not as it seems

How will the scheme work?
People who experience a significant temporary loss of income will be able to defer a proportion of the interest payments on their mortgage for up to two years. Deferred payments will be added to the outstanding mortgage debt.
How many people will benefit from it?
Margaret Beckett reportedly suggested 9,000 but refused to confirm this today. This compares with 75,000 households expected to be repossessed next year.

Who will be eligible?
Again, this is unclear. Mrs Beckett today said banks would have to decide on a case by case basis. But homeowners refused this help will be furious if their neighbours are bailed out. Lenders stress it will not be used for people with longer term financial difficulties. It will cover mortgages up to £400,000 and for cases such as where one earner in a household loses their job. The unemployed can get other help.

Has the scheme been rushed out?
Yes. Banks reportedly were given a day's notice that it was being announced. One senior banker said: "You can tell Peter Mandelson is back in town. The press are being briefed before we've even been properly consulted."

When will it start?
The Government plans to work with lenders to get it up and running in the new year. But recent deals between ministers and banks have unravelled.