Mortgage Rescue Scheme funding cut

Funding for the Mortgage Rescue Scheme, that helps protect vulnerable homeowners in England at risk of repossession will be cut, housing minister Grant Shapps has announced.

Shapps said: ‘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’. 

‘The longer term role for the Mortgage Rescue Scheme will be considered through the Spending Review,’ he added.

The government scheme allows people who can no longer afford their mortgage repayments to sell their home to a local authority or housing association, and remain in the property as a tenant. The scheme also allows struggling homeowners to reduce their mortgage repayments by selling part of their home in an equity deal.

According to the housing minister: '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.'

Shapps however acknowledged that there must still be effective help on hand for those struggling to pay their mortgages and said another scheme, the Homeowners Mortgage Support Scheme, will remain in place as a backstop scheme that may be needed if interest rates rise. 

This scheme allows people who suffer a sudden, temporary loss of income to defer their mortgage payments for up to two years. However, since its launch in April 2009 it has only helped 34 people.

The risk of increased numbers of repossessions will remain high in the years ahead, according to a separate report. The Council of Mortgage Lenders' latest forecast predicted that there will be 53,000 repossessions in 2010.