Gordon Brown today announced measures to help families avoid repossession by deferring a proportion of their mortgage interest payments for up to two years.
Mr Brown told the Commons that eight of the UK's major lenders had signed up to the scheme, which would be covered by a Government guarantee. The initiative will cover mortgages worth up to £400,000.
The announcement will mean more affordable monthly payments for households facing difficult times.
The Prime Minister also said Government-owned lenders Northern Rock and Bradford and Bingley had joined Lloyds TSB in agreeing that repossession proceedings would not begin until households were six months behind on their payments.
He urged other "responsible banks" to follow their lead.
Announcing the new measure on interest payments, Mr 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."
Mr Brown said the measure was in addition to protection for the unemployed who can claim help to meet payments after 13 weeks.
"This measure will extend protection for those in work as well as those out of work and be available at a higher level of income."
Lenders who have already signed up to the scheme include HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays and HSBC.
The lenders are responsible for 70 per cent of the home loans held in the UK and further details of the scheme will be announced in the next few days, Mr Brown said.
"The result will be more affordable monthly payments for homeowners who are needing a bridge through difficult times."
The news came after reports that the number of homes to be repossessed could soar to 75,000 next year.
The figure would be well up on predictions that 45,000 homes could be repossessed this year, while it would be nearly as high as during the housing market crash in 1991.
The prediction was given to Government ministers by industry body the Council of Mortgage Lenders, according to the BBC.
But the CML said it had not yet finalised its predictions for repossession numbers for 2009, adding that it was deliberately holding off doing so while new policy initiatives in the area were being announced.
Repossession levels are increasing in the face of the economic downturn and rising unemployment, with 11,300 people losing their homes during the third quarter of the year, 12 per cent more than during the previous three months.
Nationalised bank Northern Rock today joined Royal Bank of Scotland in pledging to wait for at least six months after customers got into arrears before beginning repossession action.Reuse content