Julian Knight: Mortgage rescue? Save us from false promises

Fresh from bailing out the banks, Gordon Brown, Peter Mandelson and Alistair Darling are fast becoming addicts to the opiate of intervention. Every other day, it seems, the banking bigwigs are being told what the Government wants them to do next. They should probably apply for a Whitehall parking pass for their chauffeur-driven Mercs, they are there so often.

No bad thing, you may say – they got us into this mess in the first place (even if we as consumers weren't forced to borrow so much money), so why shouldn't Labour order the banking bosses about?

And fair enough, this column has long been arguing that action on repossessions needed to be taken by the Government and regulators. After all, people have been losing their homes too quickly and have been charged unfair fees for going into arrears. Some banks have been sheer bloody minded, for instance preventing homeowners from converting their mortgage to interest only temporarily.

In the past few weeks, we've had big lenders signing up to what amounts to a code of conduct on repossession. Northern Rock – a serial offender when it comes to seizing people's homes unnecessarily – and Royal Bank of Scotland now say they won't repossess until six months of arrears have been clocked up.

We have also heard the Financial Services Authority saying it will come down on lenders that don't "treat their customers fairly".

Therefore, it was a welcome move by the Government last week to bang the heads of the UK's biggest eight lenders together and get them to agree to its mortgage rescue scheme, under which the Government will underwrite missed repayments. But I fear that the initiative could be more style than substance. I know that is the way with politics – and Labour has one eye on a potential early election – but these are people's homes we're talking about. If the scheme doesn't meet expectations, it will be as cynical a political act as I can remember.

After the announcement, I received an email from a reader who has been battling repossession. The tone was one of relief: he thought the mortgage scheme would provide a breathing space while he got back into work. Two days later and the relief had gone: his lender had told him the details of the scheme were undecided and repossession would proceed.

No one is sure how the scheme will work in practice. Will you have to be in receipt of benefits? How can you prove you are doing everything you can to pay the mortgage? What if you have even small savings? How do you show that your earnings have fallen enough to qualify for help? Are all lenders going to apply the same rules, or will it be on a case-by-case basis? And if it's the latter, as seems likely, how will fairness be ensured? Will it depend on something as random as how you get on with the bank worker at the other end of the phone line?

There are questions galore and few answers because the scheme was drawn up in double-quick time, presumably so the Tories could be wrong- footed. The banks had a maximum two days' notice and now some are grumbling privately that they were bounced into agreeing. What's more, the deal only covers 70 per cent of the market, so what about the other 30 per cent? Many of the repossessions are, after all, being brought by sub- prime and remortgage lenders that aren't in on this scheme. There is a risk that after the initial "hit" of the rescue announcement, many borrowers will be left to go cold turkey.