KEY POINTS:
Banks have assured the Government they will do their best to help financially stressed mortgage borrowers.
The assurance was extracted during discussions over a new wholesale funding guarantee scheme for banks, announced yesterday by Finance Minister Michael Cullen.
Prime Minister Helen Clark said yesterday that while mortgages wouldn't
be guaranteed, the Government had "very high expectation of the banks... that if people get into trouble with their mortgages, very best endeavours will be made to see that they can carry on with their home".
Clark said banks were expected to "bend over backwards" to support borrowers who got into temporary financial strife because of redundancy or for other reasons.
Banks would look at customers on a case-by-case basis, Cullen said. Where there was a reasonable expectation that borrowers could resume payments within a reasonable period, banks would work with them to avoid foreclosure.
They could consider adding interest to the mortgage, known as capitalising interest, or temporarily reducing servicing fees to help borrowers get on their feet again.
Clark said the Government had strongly supported the banking system, offering retail and now wholesale funding guarantee schemes, and "it cuts both ways".
The wholesale scheme will guarantee banks' debts to other banks and lending institutions, providing security to borrowers, who depend on banks having strong credit lines. It follows similar moves by other countries.
Earlier, Clark said New Zealand banks were not in any trouble with inter-bank lending and the scheme was precautionary.
National Party leader John Key said he was confident the scheme would work. National had been kept in the loop with today's announcement. When a similar scheme for mum-and-dad bank customers' deposits was first flagged a few weeks ago, Key wasn't consulted.
Key said the scheme was intentionally slightly less generous than its Australian counterpart. This would encourage major banks' Australian parents to provide greater support to their New Zealand operations.
While Clark attended an opening of a Pasifika health centre in Mangere East yesterday afternoon, Key held a 30-minute meeting with Act leader Rodney Hide at a Remuera coffee shop
"I'm very comfortable that National would be able to work with Act should we be in a position to put together a future Government," he said afterwards. "I would envisage Rodney Hide being a minister in that Government."
However, he ruled out Sir Roger Douglas becoming a minister.
Despite National's "two ticks" campaign, the coffee date was a clear signal to National's supporters in Epsom that National needs them to return Rodney Hide and his party to Parliament. In the run-up to the previous election, former National leader Don Brash refused to schedule a similar public meeting with Hide.
