Help for struggling mortgage borrowers urged

The Council of Mortgage Lenders (CML) says repossessions have so far been kept down to a much greater extent than predicted due to the Support for Mortgage Interest (SMI) scheme, which helps those having trouble with home loan payments.

The CML insists a more generous availability of SMI has helped a decline in repossessions over the last two years, which dropped to 37,000 in 2011, helping nearly 250,000 stay in their homes.

But it expects to see repossessions rise to 45,000 this year, due to the uncertain economy.

The CML says two changes played a "critical" part in keeping repossessions down. The first is the introduction of a shorter three-month qualifying period before people receive help, instead of 39 weeks.

The second is a temporary extension to the size of loans covered by SMI from £100,000 to £200,000, which the CML says is an accurate measure of typical house prices.

These arrangements are due to be scaled back from next year.

'Another year'

The lending body says: "Our response urges the Government to keep both of these measures in place for another year.

"Over the last three years, paying SMI after a three-month qualifying period and providing more generous cover have helped nearly 250,000 people stay in their homes at any one time."

Last December, the Government said the SMI payments system, which costs £400 million a year, is not sustainable and does not encourage people to get on top of their finances.

The CML suggests some long-term claimants of SMI could incur a charge levied on their property, to offset the extra burden on public funds caused by continuing the temporary rules.

A Department for Work and Pensions spokeswoman says: "We are committed to supporting people to stay in their own homes when times are hard but we also need to find the right balance between making a reasonable contribution to owner-occupiers' housing costs and providing value for money for the taxpayer.

"We are looking at how the scheme should operate in future and we will update on future policy as soon as possible."