U.K. Unveils Mortgage-Deferral Plan
MICHELE NORRIS, host:
The U.K. has its own economic troubles connected to the housing market. And yesterday, Prime Minister Gordon Brown offered homeowners a reprieve. He announced a plan to let people who were affected by the economic downturn defer interest payments on their mortgages for up to two years. NPR's Rob Gifford reports.
ROB GIFFORD: Unemployment is rising sharply in Britain, and people are squeezed economically on all fronts. No doubt in the knowledge that he has to call a general election at some point in the next 18 months, Gordon Brown has been working overtime to try to ease the pressure on homeowners. His announcement in parliament on the deferral of mortgage payments came as a surprise.
Prime Minister GORDON BROWN (United Kingdom): Hardworking households that experience a redundancy or significant loss of income as a result of the downturn will be able to defer a proportion of their interest payments for up to two years while they get their family finances back on track.
GIFFORD: The scheme, which applies to loans of to $600,000, will be underwritten by the government. At a time of already massive increases in government borrowing, this could add another $1.5 billion to the government's tab. But Gordon Brown clearly thinks that's worth it to stave off more foreclosures. Any of the details such as who exactly will qualify for the scheme are yet to be ironed out. But Brown's housing minister, Margaret Beckett, stressed this was not an easy option for lazy people.
Ms. MARGARET BECKETT (Housing Minister, United Kingdom): Not people who are not bothered who aren't trying to pay, but the people who are trying, but facing real temporary problems. By deferring some of their interest payments, making what they have to pay now less, bills will have to be met in the long term, but we want to help them through this period of real difficulty.
GIFFORD: The move comes amid reports that without the government's intervention, the number of foreclosures next year could be the highest since 1991, the worst year of the last recession in Britain. Media reports say there was substantial arm twisting by Gordon Brown and his team on the banks, 70 percent of whom have now agreed to sign up to the mortgage deferral scheme. David Orr is the chief executive of the National Housing Federation which works to provide affordable housing to British people. He was among many in the housing profession who welcomed the government's move.
Mr. DAVID ORR (Chief Executive, National Housing Federation): It's very important that we do as much as we can to bring confidence back to people. And anything that can avoid the trauma and the personal and social cost of repossession is - has to be welcomed. So, these measures do seem to me to be a proper response to a real crisis in the housing market.
GIFFORD: There was more economic news today as the Bank of England announced that it's cutting its base interest rate by a further one percent, taking it down to two percent, the lowest rate of interest since 1951. If the rate's cut by a further half of percentage point, as some predict, it will the lowest since the foundation of the Bank of England in 1694. Now, no doubt, there will be more arm twisting by politicians to try to persuade the high street banks to pass on that rate cut to their borrowers. Rob Gifford, NPR News, London.