President George W. Bush today announced an interest-rate freeze for subprime borrowers that Democrats said didn’t go far enough and Standard & Poor’s warned may lead to lower ratings on some mortgage bonds.

Bush said the plan, negotiated by Treasury Secretary Henry Paulson and other regulators with mortgage lenders, may help as many as 1.2 million Americans keep their homes. The agreement, which touched off a rally in builders’ stocks, is aimed at borrowers who can’t afford their mortgages after they reset higher from low starter rates.

“It’s a small step in the right direction,” said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts. The plan may help about 15 to 20 percent of subprime borrowers, he estimated. “It is an important band-aid but the arm is hemorrhaging.”

Bush spoke hours after the Mortgage Bankers Association said homeowners fell behind on their mortgage payments at the highest rate in more than two decades last quarter. S&P said later that, by fixing rates at lower levels, the agreement will hurt the value of securities backed by mortgages. [MORE]