£1bn mortgage rescue scheme unveiled

The Department for Communities and Local Government has unveiled a £1bn package to stimulate the housing market.

Hazel Blears, communities secretary, says the aim of the cross-government plan is to help first-time buyers struggling to get onto the housing ladder, support vulnerable homeowners at risk of repossession and support the house building sector.

The measures include:

* A £300m shared equity scheme to 10,000 first-time buyers.

* A £200m mortgage rescue scheme to support up to 6,000 of the most vulnerable homeowners facing repossession.

* A £100m investment to support Support for Mortgage Interest reform which could help prevent a further 10,000 repossessions. The government will shorten the waiting period before SMI is paid from 39 weeks to 13 weeks.

* A £400m boost in spending power for social housing providers, including registered social landlords and councils with the aim of delivering 5,500 more social houses over the next 18 months.

The government will also work with Regional Development Agencies to support the most critical regeneration schemes with the most potential to transform their communities.

Blears says: “This government is committed to practical action to help those most affected by the current state of the housing market. We are working to make sure everyone struggling to pay the mortgage gets support and advice.

“We are giving a leg-up to first-time buyers keen to own a place of their own. And by bringing forward our investment in social housing, we are both getting more decent, affordable housing ready for people to live in sooner, and helping the house building industry weather tough times.”

Below is a brief breakdown of what each of the rescue schemes will entail.

Mortgage Rescue

For those most affected by the international credit crunch. The government says that by comparison with the 1990s, repossessions do remain low, but there has been a recent increase in numbers. The impact on family life can be immense.

It says the £200m mortgage rescue scheme will go significantly further, helping up to 6,000 of the most vulnerable families avoid repossession.

This will not help those who have acted recklessly or irresponsibly. It is firmly targeted on those families who can no longer afford their repayments, and who would be eligible for homelessness assistance.

Local authorities will have a major role in this scheme assessing applications. Depending on their specific circumstances, eligible home owners will be offered one of three options:

1. Shared ownership, where a registered social landlord buys a share – which enables the purchaser to pay off some of their mortgage and coverts the property to shared ownership by issuing a shared ownership lease.

2. Shared equity, where a registered social landlord provides an equity loan enabling the householders mortgage payments to be reduced.

3. Sale and rent back, where a registered social landlord clears the secured debt completely and the applicant pays rent to the RSL at a level they can afford. The level of support the RSL will offer depends on the assessment of the individual’s circumstances, which will include a review by a money adviser.

HomeBuy Direct

The government says the £300m scheme will help up to 10,000 first-time buyers into affordable homeownership over the next two years.

HomeBuy Direct will give eligible first-time buyers keen to own a place of their own the chance to buy some newly built properties. Buyers will be offered an equity loan of up to 30% of the value, which will befunded by the government and the developer, free of charge for five years.

As with other HomeBuy, schemes, any first-time buyers whose household income is under £60 000 will be able to apply.

It claims that not only will this help first-time buyers, but it will also support the industry by identifying buyers for their new homes.

The government adds that this will help the house building industry weather difficult conditions, so that, when the market recovers, they are ready to expand and get back on with building the new homes the country needs for the long term.

Affordable housing

An immediate £400m boost in spending power for affordable housing schemes. The government is committed to a major increase in affordable and social housing to meet demand and cut waiting lists.

But with current challenging market conditions, providers are finding it more difficult to deliver their affordable housing schemes.

The government has decided to bring forward £400m for social housing from existing budgets, delivering up to 5,500 more homes over the next 18 months.

For the first time local authorities with existing stock will able to apply for this grant to build social housing, alongside registered social landlords.

As well as delivering the social housing so desperately needed in many areas, this will also help to maintain capacity within the housebuilding industry, and help prepare the ground for the recovery in the market.

Regeneration

The government says it’s working with Regional Development Agencies to support the most critical regeneration schemes with the most potential to transform their communities.

Market conditions have led to some regeneration schemes slowing down or stalling. This can the limit the potential of these schemes to transform lives in deprived areas.

We are keen to take action where possible to alleviate these effects. As part of this package we will be working with RDAs and the HCA to look at possible interventions on projects that will deliver the most significant regeneration benefits.