Ministers are struggling to secure more protection for homeowners facing repossession, with the judiciary and banks resisting pressure to show leniency that goes beyond existing law.
Some judges are opposing requests from Jack Straw, justice secretary, to give more leeway to people defaulting on their mortgages and permit them to change their repayment terms, according to Whitehall sources.
Yvette Cooper, chief secretary to the Treasury, said yesterday that repossessions should be a 'last resort' by the banks.
She called for alternatives such as “re-profiling” payments, repayment holidays – where only interest is paid – or schemes where banks or housing associations buy stakes in homes.
But the FT has learnt that efforts to allow borrowers to soften their repayment terms have foundered in recent weeks.
The dispute comes as the civil justice council drafts the first “pre-action protocol” for mortgage arrears, setting out guidelines for settling disputes before the matter is taken to court.