Funding shift for mortgage rescue
Government funding for a scheme aimed at helping those facing home repossessions in England is to be cut, the housing minister has announced.
Grant Shapps said that the government grant for each home bought under the Mortgage Rescue Scheme would be reduced although the total kitty was unchanged.
The scheme lets people sell their property to a council or housing association and stay in it as a tenant.
He said reducing the deficit to keep interest rates low was more effective.
Housing is a devolved power, and separate schemes are in operation in Scotland and Wales.Take-up
The Mortgage Rescue Scheme in England, which also allows people to sell part of the home in a shared equity deal to reduce mortgage payments, has helped 629 households since it was set up in early 2009.
Another 1,849 applications were ongoing by the end of March, the latest figures show. In these cases, lenders would hold off any repossession action.
When it was launched under the previous Labour government in January 2009, ministers said that up to 6,000 households could be helped by the scheme.
Housing groups said government support for homeowners had helped keep a lid on repossessions, which are much lower than during the housing slump of the early 1990s.
This prompted the Council of Mortgage Lenders (CML), charity Shelter and Citizens Advice to write to Chancellor George Osborne to urge him to keep support schemes going.
Mr Shapps said that the Mortgage Rescue Scheme needed to be "refocused" to offer better value for money, claiming that the funding - of £180m this financial year - could run out.
Funding levels will be looked at again in the overall spending review in October.
The pot of government money in the scheme will remain the same. However, the proportion of government funding for each home bought by a housing association will fall from 65% to 55%. The government says this will allow more people to take part in the scheme.
Another scheme to help those struggling with mortgage arrears would be retained as a backstop if interest rates rose, he added.
End Quote Grant Shapps Housing minister
There must still be effective help on hand for those struggling to pay their mortgages”
The Homeowners Mortgage Support Scheme allows homeowners to defer up to 70% of their mortgage interest payments if they have a sudden, and temporary, loss of income.
There are various other terms and conditions, and not all lenders allow it. So far it had only helped 34 people, the government said.Tackling the deficit
"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," Mr Shapps said.
"But there must still be effective help on hand for those struggling to pay their mortgages."
The latest figures from lenders, published in May, showed that the number of homes repossessed in the UK fell by 7.5% in the first three months of 2010.
CML figures showed that the number of homes repossessed dropped from 10,600 in the last three months of 2009 to 9,800 in the first quarter of 2010. This was also lower than the 13,200 of the same period a year ago.
The CML has described its original forecast of 53,000 repossessions in 2010 as "pessimistic", and said that lenders had taken into account the courts protocol that meant repossession should only be a last resort.
The figures also revealed that the proportion of mortgage holders getting into payment difficulties also fell in the first three months of the year.
Mr Shapps said that the government was also publishing a report, commissioned by the previous administration, that said tolerant lenders and government schemes had helped homeowners.
But it warned that there was a risk of high repossession levels in the years ahead.