Housing Minister Grant Shapps has today outlined how the Coalition Government will provide much-needed support to homeowners at risk of repossession.
The risk of repossessions remains high - the Council of Mortgage Lenders’ latest forecast is that there will be 53,000 repossessions in 2010. So Mr Shapps is also stepping up work with partner organisations including Citizens Advice and Shelter to help promote the help available to struggling homeowners.
And today, he welcomed the support of Martin Lewis, creator of www.moneysavingexpert.com (external link), for the ongoing effort to encourage more struggling homeowners to seek early help and advice with their mortgage worries.
But the Minister also emphasised that the most effective thing the Government is doing to help homeowners is to tackle the record deficit and prevent the need for rapid increases in interest rates.
One of Mr Shapps’s first tasks since becoming Housing Minister has been to take a fresh look at Communities and Local Government schemes which provide help to homeowners facing difficulty in paying their mortgage, making sure they offer the best deal for them and value for money for taxpayers.
With this in mind, the Mortgage Rescue Scheme will be refocused to delivery better value for money, with a reduction in the grant rate paid to Housing Associations and tighter caps on property price and repair costs.
Using their knowledge of the needs of their communities, councils will help to deliver the scheme alongside their local housing associations to ensure that the scheme is targeted at homeowners who are most likely to benefit from it.
The longer term role for the Mortgage Rescue Scheme will be considered through the Spending Review.
Since its launch in April 2009, the Homeowners Mortgage Support Scheme has only helped 34 people although research to be published shortly shows that it has had a positive impact on lender forbearance practice and mortgage arrears management. However, given the low administrative costs, the Minister has decided that it will remain in place as a backstop scheme that maybe needed if interest rates rise. It will close as planned at the end of the financial year.
This follows the decision announced in the Budget to move support for mortgage interest paid to a rate that provides better value for money for the taxpayer, by applying the Bank of England published average mortgage rate as the standard interest rate from October.
Grant 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.
So today I can confirm that the Mortgage Rescue Scheme and Homeowners Mortgage Support Scheme remain available as a last resort to homeowners facing the real threat of repossession.
But the most effective thing anyone with money worries can do is to not bury their heads in the sand, seek early advice and speak to their lender to avoid losing their home. I would urge people to visit www.direct.gov.uk/mortgagehelp (external link), or contact organisations like Citizens Advice or Shelter for free advice on taking control of their finances.
Independent Moneysavingexpert Martin Lewis said:
Mortgage repossession’s a catastrophic threat for struggling families, and anything that’s done to help them ride it out is crucial. The most important rule is get help as soon as possible - fighting repossession when they’re coming for your house is a too late, instead act as soon as you spot the potential for trouble and possible arrears.
The help at hand means some who qualify will have their mortgage interest paid for them, others will be allowed to postpone paying both through official government scheme and improved lender leniency and a few may have their house part bought.
So the golden rule is if you’re in trouble speak to your lender asap and a non profit agency like Citizens advice or National Debline for help plus visit www.moneysavingexpert.com/mortgagearrears (external link) and www.direct.gov.uk/mortgagehelp (external link) and you may find its easier to start sleeping at night.
A separate report by Professor John Muellbauer and Dr Janine Aron of Oxford University published today shows that the combination of greater tolerance from lenders and Government schemes on offer has had a notable effect in helping homeowners. This report also warns that the risk of increased numbers of repossessions will remain high in the years ahead.
An independent evaluation of the schemes by a team led by Professor Steve Wilcox from the Centre for Housing Policy (University of York) and the School of the Built Environment (Heriot Watt University) is due to be published shortly showing that there is widespread support for the Mortgage Rescue Scheme from partners and borrowers and that its continuation would remain beneficial at a lower grant rate. And on the Homeowners Mortgage Support Scheme, the report shows that it has been found to have influenced the extent to which lenders have offered greater tolerance and patience to those in arrears, and that there was a case for it continuing until the housing market had recovered.
The Department’s schemes are part of a comprehensive range of help and advice for struggling homeowners.
Anyone with mortgage worries can go to www.direct.gov.uk/mortgagehelp (external link) where they can get impartial advice, find out the steps they can take to keep their home and prepare an action plan to tackle their own finances. Free debt advice is also available from organisations including Citizens Advice, Shelter and National Debtline.
The Financial Services Authority has also recently introduced tough new rules on lenders so repossession remains the last resort, and so those in arrears who have come to an agreement on repayment are treated fairly.
Notes to editors
Modelling and Forecasting UK Mortgage Arrears and Possessions by Professor John Muellbauer and Janine Aron, Oxford University, is published today and can be found at: www.communities.gov.uk/publications/housing/modellingarrearssummary.
Evaluation of the Mortgage Rescue Scheme Homeowners Mortgage Support Interim Report by the Centre of housing Policy (University of York) and School of the Built Environment (Heriot Watt University) will be published shortly on the Department’s website.
It was announced on 14 June 2010 that since the launch of the Homeowners Mortgage Support Scheme in April 2009, 34 households had been accepted onto the Scheme to the end of April 2010.
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