By Jill Fraser for Lending Central

Aligning with Federal Opposition criticisms Mortgage House managing director, Ken Sayer says the Government is wrong to take credit for an agreement by the four major banks to give mortgage relief to people who lose their jobs as a result of the global financial crisis.

Under a plan announced by Prime Minister, Kevin Rudd last weekend the CBA, Westpac, NAB and ANZ banks will postpone home loan repayments for up to 12 months, with interest to be rolled back into the loan, for people in hardship.

Rudd is claiming credit for the brokered deal with the banks but Opposition treasury spokesman, Joe Hockey said the scheme had been announced two weeks earlier by the CBA and the Prime Minister is simply capitalising on this.

Sayer agrees but goes a step further maintaining that the potential for a respite in mortgage repayments due to extreme hardship has “always been in existence” and at the discretion of mortgage lenders utilised when warranted.

Mortgage House, in conjunction with Genworth Financial, launched its hardship initiative in September 2008.

Sayer, who admits that Mortgage House has been “smashed” over the past 18 months but claims “in a world full of ugly we’re still looking pretty” says his concern is that the Government’s “grandstanding” over this issue is giving consumers a false sense of security.

“If a person is educated, has a career path that has hope and 40% equity in his or her home it would be irresponsible not to capitalise interest,” he says.

But he notes that the reality is that hardship can only be assisted through capitalisation in one out of 100 cases; a fact that has not been spelt out clearly by the Government.

Declaring that Rudd’s failure to communicate this point is a “joke” Sayer says this is one of the first things he tells consumers.

“Say for example you’ve been working in the resources sector in a mine earning $120,000 a year. If you lose that job it’s highly unlikely that you’ll earn that kind of money again. So if I capitalise your interest and let you exercise the hardship provisioning I’m effectively burying you,” he says.

“You would only capitalise interest in an instance where your borrower has a better than average chance of enjoying an income flow the same as or higher than the previous one.”

Diminishing real estate values, he says, will be a big trap regarding long-term implications of the rescue plan.

“Hypothetically speaking, if you live in Liverpool, NSW it’s likely that 12 months down the track your house is going to be worth 10% less.

“If you’re already 95% geared up and a mortgage lender lets you capitalise 12 months worth of interest they’re hardly doing you a favour,” he says.

Sayer’s final word regarding the Government’s failure to spell out the fine print when it announced the mortgage freeze plan, “I have no respect for people who play with Mr and Mrs Smith’s feelings”.