With a 40% cut in the rate at which borrowers receive income support to cover their mortgage payments, the Council of Mortgage Lenders (CML) is urging the government to resist further cuts to this benefit in its forthcoming comprehensive spending review and, in particular, to maintain the 13-week qualifying period for payments.

The CML understands the pressures on government funding and accepts there is a case for reducing the rate from 6.08% to 3.63%, as the government has done. However, the decision means that fewer borrowers will receive payments covering their mortgage interest in full, and all households receiving the benefit will come under greater financial pressure.

The CML can nonetheless re-assure borrowers that lenders will continue treat them sympathetically if they experience payment problems. We urge any borrower anticipating payment difficulty - either as a result of the benefit change or for any other reason - to contact their lender as soon as possible. Lenders will treat borrowers fairly, and will seek to work out a plan for dealing with the borrower's problems that is tailored to their individual circumstances.


Commenting on the reduction in the rate at which ISMI is paid from 6.08% to the Bank of England's average mortgage rate (3.63%), CML Director General Michael Coogan said: "A combination of low interest rates and the concerted efforts of borrowers, lenders and the government have brought about a reduction in arrears and possessions, despite the economic slowdown. Paying benefit at a lower rate will put extra pressure on household finances, and any borrower anticipating payment problems should talk as soon as possible to their lender, who will treat them sympathetically and try to work out a solution with them.

"Lender forbearance has played a crucial role in keeping arrears and possessions in check, and this is reinforced by the certainty for lenders and borrowers of benefit payments, albeit at a reduced rate, within 13 weeks. But any move to lengthen the qualifying period - and in particular to return to a 39-week waiting time - will seriously undermine the efforts of lenders and borrowers to work together to try to ensure that going into arrears does not result in the home being repossessed. Continuing government support, including the funding of debt advice, is vital in helping keep people in their homes."

(CD/KMcA)