Alistair Darling extended the potential length of a state-backed mortgage holiday for struggling homeowners yesterday, but he insisted that the risks of default would be shared with lenders.

Darling’s move significantly changed the terms of the hastily arranged mortgage scheme, which was first billed as offering a government guarantee to let struggling homeowners defer interest payments for up to two years.

Amid confusion among lenders over the proposals, the Treasury released more details, which in effect restricted eligibility for the scheme, extended the potential length of the holiday and spread the risks of the guarantee to lenders.

While officials said the scheme would open a window of two years, the length of the mortgage holiday would be determined case by case.

That meant in some circumstances, such as an unexpected illness, the government guarantee could last for four years or more.

Financial Times