Mortgage rescue scheme launched as repossession warnings grow

Friday, 16 January 2009 11:06

Up to 6,000 households facing repossession are set to get help to stay in their homes under a new mortgage rescue scheme announced today by the government.

With over 75,000 homes set to face repossession in 2009, the mortgage rescue scheme is aimed at aiding those whom would be liable for re-housing from local authorities if they lose their homes.

The £200 million scheme is open to people earning less than £60,000 - with the elderly, disabled or those with children expected to be targeted.

The scheme today is being extended to all local authority areas in the UK.

Capital Economics has warned repossession numbers could pass their early 1990s peak of 75,500 this year. This is a view supported by the Council of Mortgage Lenders Council of Mortgage Lenders (CML).

Homeowners who wish to apply for the scheme are advised to contact their local authority or seek advice from a local Citizens Advice Bureau.

Housing minister Margaret Beckett said: "We know that some families are worried about their mortgage payments right now, and we are determined to do everything possible to ensure repossession is always a last resort.

"For the most vulnerable households, the mortgage rescue scheme will be available across England to help ensure they can remain in their homes."

Havering Council is one of 80 councils that brought in the scheme in December and so far 16 households have applied.

"We at a very early stage, but there will be a range of people to help," said Liz Aelberry.

"Anyone who feels their finances are not quite in shape can come to the council advice centre and get advice on how to move on.

"We can help but people have got to ask. People are frighten by their situations, but they have to come in for help early."

Responding to the announcement, Conservative shadow housing minister, Grant Shapps, said: "We welcome anything that will genuinely keep people in their homes, but ministers are guilty of running around like headless chickens announcing complicated, confusing and often contradictory plans, which later turn out to help far fewer people than the headlines would have you believe.

"What is more they are not just re-announcements, but re-announcements that simply aren't going to help many families."

The mortgage rescue scheme is part of a range of measures to hold back the number of repossessions.

The government has also expanded Income Support for Mortgage Interest (ISMI) to provide financial support to help homeowners pay the interest on their mortgages if they lose their jobs after 13 weeks.

ISMI is available to homeowners who have an outstanding mortgage of less than £200,000.

Homeowners cannot take advantage of both ISMI and the mortgage rescue scheme.

Seema Shah, property economist at Capital Economics, said: "Thanks to sharply rising unemployment, we expect mortgage arrears to surpass the early 1990s highs.

"While government pressure on lenders to be more lenient with struggling households and the introduction of several measures to help borrowers in arrears will limit the number of households who lose their homes, the severity of the economic downturn means that possessions will still match, or even exceed, their early 1990s peak of 75,500."

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