The Government will continue its Mortgage Rescue Scheme to stave off rising repossession numbers, but has announced plans to cut its funding as it searches for ways to ensure it delivers better value for money.
The schemes, which help vulnerable borrowers sell a portion or all of the value of their homes to housing associations so they can stay in the property, will see cutbacks, including tighter caps on property prices and repair costs.
Since its launch in April 2009, the Homeowners Mortgage Support Scheme has only helped 34 people, although more than 1,600 are in the system having applications processed.
Council of Mortgage Lenders' (CML) figures predict a worsening repossessions climate with 53,000 repossessions expected in 2010.
But housing minister Grant Shapps says the most effective thing the Government is doing to help homeowners is tackling the record deficit to prevent the need for interest rate rises.
Shapps says the longer term role for the Mortgage Rescue Scheme will be considered through the Spending Review, but the present scheme will close as planned in April 2011.
However, the interest rate paid to those struggling to pay their mortgages repayments each month was cut after the emergency Budget.
Shapps says: "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. But there must still be effective help on hand for those struggling to pay their mortgages."
A separate report by Professor John Muellbauer and Dr Janine Aron of Oxford University also published today shows the combination of greater tolerance from lenders and Government schemes on offer has kept repossession levels down.
But the report also warns the risk of increased numbers of repossessions will remain high in the years ahead.
According to the Department for Communities and Local Government website, more than 330,000 homeowners have had help or advice from the Government about their mortgage since April 2008.
The Mortgage Rescue Scheme was introduced by the previous government to help the most vulnerable facing repossession, including those families with children and the elderly.
It comprises two separate schemes including the Government Mortgage to Rent, where the Registered Social Landlord (RSL) purchases the property and the applicant pays rent to the RSL at a level they can afford after a full assessment of household finances.
The other option is a shared equity scheme where a RSL provides a homeowner with a loan allowing homeowners to reduce their payments, using their home as security.
For more information on the schemes, click HERE.
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