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The new scheme will give homeowners who are experiencing financial problems sufficient time to find new employment or recover income, without the added concern and stress of potentially losing their home in the interim.

This complements the current framework of support, including the Support for Mortgage Interest (SMI) scheme, which is aimed primarily at households where no one is in work.

The scheme will allow lenders to reduce a borrower's current monthly mortgage payments, with the deferred payments rolled up, added to the principle, and paid at a later date when the borrower's financial circumstances have improved.

The government will guarantee the lender against a proportion of any loss incurred on the deferred interest payments in case the borrower defaults.

The scheme will be voluntary and subject to eligibility criteria to ensure that there is proper risk sharing between government, lenders and borrowers and the scheme is sustainable for those that participate.

To qualify, borrowers will:

• have suffered a loss of income from employment or self-employment of a scale which now makes full mortgage payments difficult, but which is not expected to be a permanent loss of income
• have been in dialogue with their lender, including over the use of existing forbearance policies, and have been making some level of regular payment
• have taken out a mortgage of up to £400,000
• have savings below £16,000 - which is the same as for the existing Support for Mortgage Interest scheme (SMI)
• apply for assistance as owner-occupier - the programme will not apply to people with second homes or buy-to-let properties
• not be in receipt of SMI or mortgage rescue assistance
• have been assessed as being able to pay a certain monthly amount on an ongoing basis
• have received financial advice from a party other than their lender to determine their eligibility for the scheme, including testing the long-term sustainability of their financial position, and their ability to resume full payments once their income increases
• have fallen into arrears for a number of months during which the lender has exercised forbearance

The scheme will be open for a window of two years, subject to review. The guarantee will last for a maximum time period and will expire once the customer is able to commence normal payments.

If, during the period of guarantee, the customer defaults, the government will pay the lender the equivalent sum of the total amount of the interest guaranteed that is not recoverable from equity in the property.

The Department for Communities and Local Government and HM Treasury continue to work closely with industry and consumer groups on some of the practical aspects of implementation.

More on Directgov

• Keeping your home

• Mortgage arrears or payment difficulties

• Where to get advice and support on debt