ROOF Blog

Housing minister John Healey has told a Common’s Treasury select committee that he would consider extending the homeowner mortgage rescue scheme beyond its current two-year limit, if the economy continues to struggle beyond 2010. He also rejected accusations that the government had been ‘complacent’ with its support for those at risk of repossession, although he warned that ‘a certain level of repossessions is inevitable’ in a recession.

Nearly half of people having difficulties paying their mortgage do not seek advice, often because they feel their problems are not serious enough or they do not know where to go for help. Of those who sought advice, two-thirds went to their mortgage lender, while one in four got help from Citizens Advice. The Financial Services consumer panel which produced the figures and which advises the Financial Services Authority said there was an ‘urgent need’ for more investment in information and advice, so consumers understand that debt advice agencies must not be ‘seen as a last resort’.

John Healey has announced plans to set up a new central team to fast track urgent home repossession cases from next month. He defended the government’s effort to help struggling homeowners saying it has put into place help ‘at every step of the way’ and to ensure that lenders can only repossess homes as a last resort. More than a thousand households a month were being helped under the mortgage rescue scheme, the minister said.

However, consumer groups and charities including Shelter have been speaking before a Treasury select committee looking at how mortgage lenders handle repossession cases. They have called the government schemes ineffective and accused the Financial Services Authority of being too slow in penalising lenders who are guilty of bad practice, and of failing to name and shame culprits. They said that lenders were also failing to disclose enough information on how they manage arrears cases. Kay Boycott, a Shelter spokesperson said that as many as 120,000 people could lose their homes by 2011 in a ‘second wave’ of repossessions.

The latest figures of those homeowners approaching the mortgage rescue scheme for help in paying mortgages have been released today. A further four households have been accepted, bringing the total to six which have benefited, but the number approaching the local authorities for help has remained steady.

Shelter has warned the government and mortgage lenders to start preparing for a second wave of arrears and repossessions that will hit the UK in the next two years. It says hundreds of thousands of homeowners face being repossessed or falling into arrears as the effects of rising unemployment, higher interest rates and mortgage support schemes ending start to take effect. Shelter has seen a 250 per cent increase in the number of calls to the helpline regarding mortgage arrears in the past year.

The government’s £285 million mortgage rescue scheme has helped just two families since it was launched in January. The scheme, where homeowners can sell part or all of their homes to housing associations and rent them back, was expected to help up to 6,000 households stave off repossession. A spokesperson from Communities and Local Government said the slow progress in rolling out the measures and the length of time between applications and receiving the help had meant that it was only now the first of many cases were coming through. CLG added that a further 450 applications were currently being considered.

Chief executive for the National Debtline warns that millions of households struggling with debt could be unlikely to access independent advice because charities are so overwhelmed they can only answer half the calls received. Joanna Elson speaking at the Building Societies Association conference was trying to drum up support from building societies to help homeowners in difficulty as soon as possible, and estimated that around four million people will need debt advice this year.

The chief executive of Paragon has said the government must extend financial support to specialist buy-to-let lenders or the sector will be ‘crippled’. Nigel Terrington said that the rescue package, such as the credit guarantee scheme, is only available to deposit taking institutions. According to research the number of available loan products has been reduced by 95 per cent in the past two years despite demand for private rented property remaining strong. Paragon has lent £10.7 million in the six months to March, compared with £856 million for the same period last year.

In related figures, the Ministry of Justice saw a big drop in the number of lenders getting court permissions for the early stages of repossession. There were 17,054 repossession orders granted in the courts in the first three month of the year, which was 39 per cent lower than in the same period a year earlier and 43 per cent lower than in the last three months of 2008. The ministry said the mortgage pre-action protocol coincided with a fall of around 50 per cent in the number of new mortgage repossession claims being issued, but whether the protocol resulted in claims being delayed rather than abandoned was ‘unclear’.