Call for £1bn mortgage plan details

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Under the Homeowner Mortgage Support Scheme people who experience a significant temporary loss in their income will be able to defer a proportion of the interest payments on their home loan for up to two years.

The deferred payments will be added to their 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, as it has guaranteed that lenders will not lose money if borrowers are later unable to repay the debt.

Eight lenders, accounting for 70% of the market, have already agreed to be part of the scheme, including major players such as Halifax Bank of Scotland, Abbey and Nationwide.

It is thought banks were taken by surprise by the scheme, details of which are still being finalised.

The initiative is aimed at people who temporarily lose some or all of their income, such as through redundancy or reduced hours, who may not qualify for other Government help. It will cover mortgages up to £400,000.

Announcing the move yesterday, Prime Minister Gordon Brown said: "Hard-working households that experience a redundancy or severe loss of income as a result of the downturn will be able to defer a proportion of their interest payments for up to two years as they get their family finances back on track."

The Government plans to work with lenders over the coming days to develop the scheme in detail, with a view to it being up and running in the New Year.

It builds on other Government initiatives to help prevent families losing their homes, such as the Mortgage Rescue Scheme under which people can sell some or all of their home to a social landlord and then rent it back.