The idea behind the scheme is to help homeowners stay in their homes despite financial problems like redundancy.  The lender reduces the monthly payment and the deferred amount is settled later, perhaps when the borrower finds a new job.  The lender has the benefit of a partial guarantee, funded by the tax payer if there is a default.

At present the scheme pays at 6.08% but the Government has decided to change this from October 2010 to a rate linked to the Bank of England Average Mortgage Rate. The Chancellor said that he wanted to put the scheme “on a more sustainable footing and to better reflect mortgage costs”

It seems certain that more people will lose their homes if the support is less generous than before.  This may have an effect on buy to let property landlords who may see an increased demand from people who can no longer afford mortgages. Some of these tenants may need local authority support with their rent payments.  Landlords often find it more difficult to find property insurance for houses rented to local authority tenants.

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