Cut in funding for Mortgage Rescue Scheme

Housing Minister Grant Shapps has revealed that the amount of funding made available via the Mortgage Rescue Scheme introduced by the last Government is to be reduced.

The minister confirmed that the scheme will continue to run until April 2011 as originally planned, in order to minimize the number of people losing their homes through repossession, and said that the existing schemes aimed at helping homeowners in difficulty must deliver better value for money.

Since its launch in April 2009, the Homeowners’ Mortgage Support Scheme has only helped 34 people remain in their homes, although over 1600 are in the system having applications processed.

The schemes, which help vulnerable borrowers sell a portion or all of the value of their homes to housing associations so they can stay in the property, will see cut backs, including tighter caps on property prices and repair costs.

Council of Mortgage Lender (CML) figures predict a worsening repossessions climate with 53,000 repossessions expected in 2010.

Shapps 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. But there must still be effective help on hand for those struggling to pay their mortgages."

A separate report by Professor John Muellbauer and Dr Janine Aron of Oxford University also published today shows that the combination of greater tolerance from lenders and Government schemes on offer has held down repossession levels.

This report also warns that the risk of increased numbers of repossessions will remain high in the years ahead.

According to the DCLG departmental website, over 330,000 homeowners have received advice from the Government about their mortgage since April 2008.

The Mortgage Rescue Scheme comprises two separate schemes including the Government Mortgage to Rent where the Registered Social Landlord (RSL) purchases the property and the applicant pays rent to the RSL at a level they can afford after a full assessment of household finances.

The other option is a shared equity scheme where a RSL provides a homeowner with a loan allowing homeowners to reduce their payments, using their home as security.