Banks agree to help borrowers after talks with DarlingThe government and the banking industry agreed yesterday that lenders would treat borrowers fairly in the housing market downturn and only turn to repossession The taking back of an item that has been sold on credit and delivered to the purchaser because the payments have not been made on it. For example, if an individual fails to render prompt payments on a new car, the car might be subject to repossession by the finance company, as a last resort. The chancellor, Alistair Darling, held talks with the Council of Mortgage Lenders The Council of Mortgage Lenders is an industry body representing mortgage lenders in the United Kingdom. Its members consist of banks, building societies and specialist lenders and represent 98% of mortgage lending in the UK. yesterday amid concern in Downing Street Downing Street, Westminster, London, England. On the street are the British Foreign Office and, at No. 10, the residence of the first lord of the Treasury, who is usually (although not necessarily) the prime minister of Great Britain. that the cost of many mortgages has been rising sharply in recent weeks, in spite of several interest rate cuts by the Bank of England Bank of England, central bank and note-issuing institution of Great Britain. Popularly known as the Old Lady of Threadneedle Street, its main office stands on the street of that name in London. . Bank bosses welcomed the announcement from the governor of the Bank of England The Governor of the Bank of England is the most senior position in the Bank of England. It is nominally a civil service post, but the appointment tends to be from within the Bank, with the incumbent grooming his or her successor. , Mervyn King
An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers. that has pushed mortgage costs up. Michael Coogan, head of the Council of Mortgage Lenders, said it was a "very positive step" towards easing tensions in the banking system, but a Bank of England estimate that banks would seek around £50bn in support would be just the start. "The mortgage market is facing challenges as a result of the US sub-prime crisis," Darling said after the meeting. "I welcome the arrangements that the industry has in place, and will continue to build upon, to address the concerns of borrowers in difficulty. I hope that lenders continue to take their responsibilities towards customers seriously." The banks said they would try to keep repossessions low by strengthening links with debt advisers, providing updated debt information to borrowers, and identifying borrowers facing repossession. They said they would review their arrangements and the problems some borrowers were having switching to new fixed-rate mortgage products, and report back to the chancellor by the end of May. Coogan said: "Early contact with the lender before a payment is missed should ensure the widest range of options is available so customers can help themselves to avoid payment shock." But he added that mortgage prices would continue to increase in the short term. "As and when the banks start lending to each other, the rate for lending will go down and that means that will start to bring the price down, but it is not going to be a dramatic reversal. It's going to be a slow process at best," he said. Andy Hornby, chief executive of HBOS HBOS Halifax Bank of Scotland , said the talks were "wide-ranging and constructive". Heads of other lenders such as the Nationwide, Abbey, and Cheltenham & Gloucester, a division of Lloyds TSB Lloyds TSB Group plc (LSE: LLOY) is a banking and insurance group in the United Kingdom. It was formed in 1995 by the merger of Lloyds Bank and the Trustee Savings Bank (TSB). The Group's head office is at 25 Gresham Street, London. , also attended the meeting. The housing minister, Caroline Flint, said: "We are dealing with an entirely different situation in the market from what was experienced in the early 90s. Demand for housing from first-time buyers and young families is high and the fundamentals of the economy are sound." But the housing charity Shelter said yesterday's agreement would do nothing to help people who face having their homes repossessed. Shelter's chief executive, Adam Sampson, said: "In the nine months since the credit crunch began, the government has bailed out Northern Rock and is now bailing out the banks with billions of pounds of taxpayers' money, while people who are in desperate need continue to struggle to make ends meet." The government is nervous about the state of the housing market, as some experts predict falls of 20% or more if the global credit crisis continues. 
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