England’s Mortgage Rescue Scheme Changes Gears

The government has announced significant changes in the way England’s Mortgage Rescue Scheme finances aid for struggling borrowers. The English program is similar to other housing programs in Scotland, Wales and Northern Island. The purpose of the scheme is to help struggling homeowners at risk of foreclosure who cannot find other methods to avoid losing their home. It also focuses on borrowers that will qualify for homeless aid if they lose their home.

This aid is provided through housing associations that buy the homes of struggling homeowners and lease them to their previous owners. This allows borrowers to avoid foreclosure without having to leave their home. However, the caveat to this scheme is that home ownership is lost and long-term leases are not a guarantee.

The program started in the first quarter of 2009. Since then, 629 households have benefited from this scheme, and over 1,900 applicants are still in process. These numbers are low when compared with the number of repossessed homes in the UK. In the first quarter of 2009, the number of repossessed homes peaked at 13,000. The first quarter of 2010 showed a drop to 10,000 repossessed homes. Nevertheless, the figures of the Mortgage Rescue Scheme are obviously inadequate to make a significant dent into the housing crisis by itself.

The main change to the mortgage rescue scheme announced by the government is the percentage of the purchase price government funds will pay for. Currently housing associations could apply to government for 65 percent of the house’s value. The government has dropped available financing to 55 percent. The overall budget for the scheme does not change. According to government representatives, this will allow more borrowers to benefit from the scheme.

Another scheme open to struggling homeowners is the Homeowners Mortgage Support Scheme. This scheme provides temporary relief to borrowers who suddenly lose their source of income. This aid can finance up to 70 percent of the mortgage interest payments. This program has been even less successful than the Mortgage Rescue Scheme. As of today, the program has helped the grand sum of 34 people.

According to a recent statement by the government, although these agencies are valuable, the best way to deal with house repossession is to reduce the country’s deficit which will drop the interest rates. The Government statement emphasized these changes do not represent a change in policy for housing aid. As mentioned above, the changes in the Mortgage Rescue Scheme changes the funds available for each house, but does not affect the overall budget available to housing associations.

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