July 26, 2010
A scheme brought in at the beginning of 2009 to help homeowners facing repossession has had its funding cut under the new coalition government.
The Mortgage Rescue Scheme was devised under the previous Labour government to help tackle repossession problems worsened by the recession. It lets struggling homeowners sell their property to a council or housing association and remain living there as tenants.
Housing minister Grant Shapps confirmed that the government grant for each home bought under the scheme would be reduced, although the total kitty was unchanged.
The proportion of government funding for each home bought by a housing association will drop from 65% to 55%.
Mr Shapps defended the cuts, saying the scheme was being “refocused” and that the fall in funding for individual houses will enable more people to take part in the scheme.
He said: “The most effective thing the government can do for homeowners is to tackle the record deficit and avoid the need for rapid increases in interest rates.”
Figures show that since its launch a year and a half ago, the Mortgage Rescue Scheme has helped 629 households. Ministers originally projected that up to 6,000 homes could be helped by the scheme.
According to figures released at the end of March, a further 1,849 applications were “ongoing”.
Ben Smith, from sale and rent back firm DFB Housing Solutions, said that the difference in funding would have a “massive effect” on struggling homeowners.
He added: “With an LTV of 55%, many people won’t have the opportunity to get out of their situation. I think the reason why the scheme hasn’t been more successful is down to having the wrong LTV and not many people knowing about it.”
Government support schemes have been attributed for keeping the number of repossessions down, compared to the recession of the early 1990s.
Figures from the Council of Mortgage Lenders (CML) showed that the number of homes repossessed in the UK declined by 7.5% in the first quarter of 2010 to 9,300. 10,600 houses were repossessed in the last quarter of 2009.