Another Government scheme to stop re-possessions

moanymoany

From Robert Pestons blog

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

What Mr Brown has announced is that if the £15,000 a year which the Slightly-Stretcheds can't pay is added to the principal they owe - if the bank allows the interest to be rolled up, to use the jargon - there will be no risk for the bank, because the Treasury will guarantee that £15,000.

Or, to put it another way, the taxpayer will promise to pay back the bank that £15,000 if the Slightly-Stretcheds find themselves unable to do so. So that sum of £15,000 will become a contingent liability of the public sector.

In this notional case, taxpayers would end up being liable for £30,000 (£15,000 for the two-year life of the scheme).

Is it me? Is this yet another barmy scheme? Answers on a postcard please.

If anyone finds Gordon's marbles please return them to.... !

purch

Is this yet another barmy scheme?

Yes

The Interest is either Deferred or it's not.....

If it's deferred then it has to be paid at a later date.

If the taxpayer pays it, then it wasn't deferred, it was written off.

mewbie_2

Our kettle had to be deferred.

ManAtHome

Will the banks show this on the books as a "Bunter" (when the govt postal order turns up next tuesday...2011ish).

treliac

mewbie wrote: »

Our kettle had to be deferred.

You should filter your water

mizzbiz

Sounds like they'll defer and then compound the interest from what I gather.

I.e. you pay the capital repayment, however the interest continues to collect so in fact the capital repayment should also go up (as I gather the interest deferred then becomes capital).

Unless i've understood wrong.

Some of the mortgages are so big anyway, with no hope of ver paying them off, that a few extra quid a month for life when we're all back in La-La land won't mean much to them.

WTF?_2

Isn't this scheme supposed to help those made redundant - but they would already get interest paid by the welfare state?

Or are they trying to cast the net wider to anyone unable to make mortgage payments?

And if it's only the interest deferred (to a max of 15k over the 2 years apparently), they still have to pay the capital part of the repayments, right ... which for a lot of people will still be impossible to meet if they have lost a job..

And what about the banks - they have lost a revenue stream. Given that they apparently are having problems with their capital base it can't help to lose those interest payments.


So many unanswered questions. Looks like another half-baked idea from Gordon which he figures he can get his puppet banks to agree too.

edgex

They should just make all the lenders write off 5% of the value of each mortgage, for all mortgages, each year for the next few years.
All the losses have to be recognised at some point on their books, so may as well do it gradually.
It would also reduce the payments that everyone is making, but dosnt actually bail anyone out.

obsessed_saver

Umm. Why should people get a discount on their houses? By not buying a house, can I get 5% (of the average house price in my area) added to my bank account?

ad44downey

Yet another clever scheme by Clown to waste even more of my income tax. :rolleyes:

Generali

!!!!!!? wrote: »

Isn't this scheme supposed to help those made redundant - but they would already get interest paid by the welfare state?

Or are they trying to cast the net wider to anyone unable to make mortgage payments?

And if it's only the interest deferred (to a max of 15k over the 2 years apparently), they still have to pay the capital part of the repayments, right ... which for a lot of people will still be impossible to meet if they have lost a job..

And what about the banks - they have lost a revenue stream. Given that they apparently are having problems with their capital base it can't help to lose those interest payments.


So many unanswered questions. Looks like another half-baked idea from Gordon which he figures he can get his puppet banks to agree too.

That this will mean a reduction in the cash flowing in to the bank will put capital adequacy under more pressure. However, not having to book a loss on repossessing a place for less than the value of the mortgage will help banks' balance sheets.

What will happen if the mortgage concerned has been securitized and sold on? The documentation that makes up the T&Cs of the bond will have strict definitions as to how and when a property will be repossessed. Also, what happens to the payments on that bond if the payments to the bank are much reduced or cease altogether?

If I had a mortgage on a house and had no chance of paying it back I'd seriously consider just not making any payments and living rent free for a couple of years.