Brown's Plan Allows Some at Risk of Default to Defer Payments
By Kevin Sullivan
Washington Post Foreign Service
Thursday, December 4, 2008
LONDON, Dec. 3 -- Prime Minister Gordon Brown threw a lifeline to people in jeopardy of defaulting on their mortgages, saying Wednesday that homeowners who lose their jobs or suffer a sharp loss in income will be allowed to defer mortgage interest payments for up to two years.
"Hardworking households that experience a redundancy or significant 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 while they get their family finances back on track," Brown said in the House of Commons. "The result will be more affordable monthly payments for homeowners who are needing a bridge through difficult times."
Brown said eight major British lenders, which represent 70 percent of all outstanding mortgages, have agreed to his plan to stave off massive home repossessions as recession takes hold and job losses mount.
Brown did not provide many details of the plan, but analysts said it basically amounts to a government insurance program for mortgage lenders. The BBC reported that the plan will cover people with mortgages of up to 400,000 pounds, or nearly $600,000.
Brown's announcement came as Britain's Council of Mortgage Lenders estimated that the number of home repossessions would hit 45,000 this year and could rise to 75,000 next year. Britain has not had that level of repossessions since 1991, during its last major recession. About 26,200 houses were repossessed last year and 8,200 in 2004.
The mortgage council estimated that 168,000 British homeowners are at least three months behind on their payments.
The council said in a statement that the program will not be a license for " 'won't pay' borrowers to avoid their responsibilities."
"But it will provide welcome reassurance to the vast majority of borrowers that the government and lenders are doing all they can, in partnership, to help those customers who 'can't pay' due to a change in circumstances as we enter a recession," the statement said.
Even Queen Elizabeth II sounded a downbeat note on the economy Wednesday as she delivered the traditional speech that opens the new session of Parliament.
"My government's overriding priority is to ensure the stability of the British economy during the global economic downturn," the queen, wearing a diamond-studded purple crown, said at a combined gathering of the House of Lords and the House of Commons.
"My government is committed to helping families and businesses through difficult times," she said, reading an address that was prepared by Brown's government and that laid out its legislative agenda for the coming session.
The speech contained about a dozen proposals, making it the briefest address since the Labor Party came to power in 1997.
In the address, the queen described bills related to welfare reform, immigration, child poverty and even binge drinking. But the economy dominated the streamlined speech, which included an incentive program to encourage low-income people to save more.
Political opponents criticized Brown's speech and his broader plan of borrowing heavily and raising taxes on the wealthiest Britons to help fund public works projects to stimulate the economy.
David Cameron, the Conservative Party leader, called the government's proposals "last year's queen's speech from yesterday's prime minister."
Cameron again alleged that Brown, during his 10 years as chancellor of the exchequer, or finance minister, had overseen policies that contributed to the economic crisis.
"The truth is that he is borrowing so much because he has spent so much," Cameron said, adding: "The prime minister is wrong in a recession, and he is wrong for a recovery."
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