The moves - by Nationwide, the second biggest building society, and the Leeds, fifth largest - come amid worries that mortgage rates are going to rise and evidence of an increase in home- owners behind with payments.
The Leeds proposes to form, with a financial institution, a company which would buy the homes of borrowers facing repossession. The company would rent them to the former owners with the option to buy back. Nationwide is working on a similar scheme.
On Wednesday, the Council of Mortgage Lenders (CML) is expected to announce that the rate of repossessions has stabilised, but that the number of loans in arrears by 6-12 months is increasing.
There are growing fears that mortgage rates will have to rise because of the continuing net outflow of money from building societies, possibly by as much as
0.5 percentage points to make investment rates more attractive. Last year lenders repossessed 76,000 homes. John Wriglesworth, the housing market analyst with the stockbroker UBS Phillips and Drew, estimates that lenders have repossessed 35,000 homes in the first half of 1992.
They have had greater success in keeping people in homes by rescheduling debts than by offering mortgage rescue packages. At the start of 1991, 160,000 home-owners were six months or more behind in payments. By January this year serious arrears cases had nearly doubled to 280,000.
But Tim Melville-Ross, chief executive of the Nationwide and CML chairman, said lenders could not continue to defer payments indefinitely.
Many building societies have experimented with rescue schemes, but found them fraught with legal and technical difficulties. The Nationwide has loaned money to housing associations which buy repossessed homes, renting them back to owners.
The Leeds would make a 'significant' initial investment in the scheme. But with a 7 per cent share of the home mortgage market, it would avoid putting more than 1,000 repossessed homes on the already depressed market.
Building society initiatives to reschedule mortgages have been more successful than the Government's rescue package.Reuse content