Alistair Darling said the interest rate on the Support for Mortgage Interest scheme - which helps those on income support by paying the interest on their mortgage if they lose their job – will be maintained at 6.08 per cent.
The move is aimed at helping those with fixed rate mortgages who took out a deal when rates were higher.
The interest had originally been extended to the end of this month, when it was then due to revert back to its initial rate of Bank rate plus 1.58 per cent, giving a rate of 2.08 per cent.
Charities and housing experts welcomed the extension, saying it would help thousands of home owners in the next six months.
Kay Boycott, director of policy and campaigns at Shelter, said: ““Measures like this have made a real difference in helping struggling homeowners keep their homes. But with unemployment continuing to rise, thousands of people are still at risk of repossession and it’s vital a long term safety net is put in place to support people in need.”
Hannah-Mercedes Skenfield, head of mortgages at personal finance website moneysupermarket.com, said: “This measure helps those hit hardest by the financial crisis.”
The CML has revised its forecast on the number of repossessions this year, down from 65,000 to 48,000.
Michael Coogan, director general at the CML, said: “Lenders are determined that possession is a last resort. However, a state safety net is also a vital part of the picture, and so we welcome today’s announcement.”
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