The federal government has admitted not every retrenched worker with a mortgage will benefit from a loan repayment reprieve it has negotiated with Australia's four major banks.
The banks have agreed to offer a 12 month period of relief from mortgage payments to workers who have lost their jobs.
They will also consider extending mortgage contract periods and reducing repayments, and providing interest-only repayment options on other loans.
But smaller banks, credit unions, building societies and non-bank lenders - who make up 20 per cent of the mortgage market - are not part of the deal.
Treasurer Wayne Swan, who negotiated the reprieve "principles", says the arrangements won't work for everyone, but will be available for those in greatest need.
"It means that workers who have gone through the trauma of losing their jobs will have up to 12 months grace from the stress of having to find the money to service their home loans," he said.
Prime Minister Kevin Rudd says it will be up to the banks to decide which of its borrowers gain relief.
"Banks will make assessments based on the borrower's ability to meet new contractual obligations in the long term," he told a jobs forum in Melbourne.
The government had asked the banks to provide "maximum flexibility" for borrowers suffering temporary hardship through "enforced unemployment".
Mr Rudd acknowledged the Commonwealth Bank already had announced reprieve measures for its borrowers.
Mr Swan said discussions were underway with credit unions and mutual building societies about their "appropriate participation" in the agreement, saying some already had procedures in place for members facing financial hardship.
The opposition says the agreement provides little comfort for retrenched workers who have mortgages with smaller lenders.
"There are literally hundreds of thousands of Australians that do not have mortgages with the major financial institutions and therefore they may well not be covered," finance spokesman Joe Hockey said.
Opposition housing spokesman Scott Morrison warned that capitalising interest could increase the risk of negative equity for some home owners.
"People who take on these options will end up with a greater debt and higher repayments at the end of the day," he said.
Westpac CEO Gail Kelly says banks do not want customers in financial hardship to feel as though they have nowhere to go.
"The last thing we want to do with regard to mortgages is actually take over someone's home," she said.
Westpac and St George have also extended their Assist program, which helps customers by extending loan terms or freezing repayments, to include small business.
In addition, the Westpac Group will provide $1 million in funding to organisations that provide financial counselling, including the Salvation Army and the Smith Family.
The ANZ says its customers are managing repayments well, but acknowledged there was "continued weakness" in the economy.
The bank had always supported borrowers facing hardship, CEO Brian Hartzer said.
"But we have decided to expand these in light of continuing difficult economic circumstances," he said.
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