Mortgage lenders snub government scheme

Just six banks have signed up to the government's mortgage relief plan, it emerged yesterday, as Barclays, HSBC, Santander and Nationwide refused to back the scheme designed to support homeowners who have lost their jobs.

The banks bailed out by the taxpayer - Lloyds Banking Group, Northern Rock, RBS and Bradford & Bingley - have all signed up to the Homeowner Mortgage Support Scheme, along with Cumberland Building Society, and Clydesdale and Yorkshire Banks owned by National Australia Bank.

Yet when the government announced the scheme in December, it said that Nationwide, Barclays, HSBC and the Santander banks Abbey and Alliance & Leicester had also agreed in principle to participate. After months of negotiations, it has emerged that all of the non-nationalised banks have pulled out. They added they would "offer comparable arrangements to their customers, while opting not to take up the government guarantee".

The government's plan was designed to help those who were hit with "significant and temporary loss of income as a result of the economic downturn to defer a proportion of the interest payments on their mortgages for up to two years".

Those affected will be able to defer mortgage and interest payments, which would be rolled up and added to the principle, allowing the borrower to pay the sum off when their circumstances improve. The government guaranteed the deferred interest payments in return for the banks signing up. Housing Minister Margaret Beckett said at the time that "we want to see all lenders signing up to this scheme as part of their efforts to ensure that repossession is always an absolute last resort".

The government expects Bank of Ireland, GMAC, GE Money, Kensington Mortgages, Standard Life Bank and the Post Office to support the scheme "soon".