Tory housing minister Grant Shapps said the government’s Mortgage Rescue Scheme, which bails out struggling homeowners by buying all or part of their home and renting it back to them, will suffer cuts as councils take over delivery.
In a statement released by the Department of Communities and Local Government this morning, Shapps said councils would be “using their knowledge of the needs of their communities” to deliver mortgage help to those “who are most likely to benefit from it”.
The statement added: “The Mortgage Rescue Scheme will be refocused to deliver better value for money, with a reduction in the grant rate paid to Housing Associations and tighter caps on property price and repair costs.” Its future will be decided later this year in the Autumn Spending Review.
The Homeowners Mortgage Support Scheme, another government scheme put in place under Labour to help homeowners hit by the financial downturn, will be scrapped at the end of the financial year. This scheme means lenders defer mortgage interest payments to help families get back on their feet. It has helped just 34 families stay in their homes since it was set up in April 2009.
The cuts to these two government support schemes follow the decision announced in George Osborne’s Budget in June to reduce Support for Mortgage Interest paid from a rate which had been frozen at 6.08% since late 2008, back in line with the Bank of England’s published average mortgage rate from October 2010.
Mortgage Introducer reported in June that the Intermediary Mortgage Lenders Association feared that move heralded the beginning of the end for the SMI scheme.
Peter Williams, executive director of IMLA, said: “I think this is just the first shot on reform of SMI. The scheme is fairly expensive and the government believes that this support has become long term for many borrowers who benefit from it.
“They don’t like paying out long term help on what’s meant to be a short term support scheme. I think there’s a government desire to adjust the structure of support, and I worry SMI will be cut in the comprehensive spending review in the autumn.”
Though Shapps said nothing today about the future of SMI, he did say the most effective thing the government could do for homeowners is “to tackle the record deficit and avoid the need for rapid increases in interest rates”.
Shapps added that in spite of these schemes remaining in place as a last resort at least until the Autumn, homeowners should speak directly to consumer groups or their lender if they have financial difficulties.
He said: “The most effective thing anyone with money worries can do is to not bury their heads in the sand and seek early advice to avoid losing their home. I would urge people to visit our website www.direct.gov.uk/mortgagehelp, or contact organisations like Citizens Advice or Shelter for free advice on taking control of their finances.”
