Buried within the government’s National Affordable Homes Programme were details about future funding for the Mortgage Rescue Scheme.
We have known since October’s Spending Review that the Treasury intends to squeeze the maximum value for money from government initiatives and were expecting that mortgage rescue would be reduced.
And we were right. Of the two mortgage rescue elements, the terms of the shared equity option will stay the same, but the ’mortgage to rent’ option, where a housing association buys the property and the home owner becomes its tenant, has been cut.
For referrals received by housing associations from March 1, the price they will pay the borrower for the property will be reduced from 97% to 90% of the market value. So where the outstanding mortgage is greater than 90% of the value, the mortgage repayment received by lenders will be reduced.
We have provided the government with evidence that recent repossession sale prices are closer to 99% of open market value and, given the disparity between this price and the amount on offer under mortgage rescue, this will make future participation in the scheme less attractive for lenders.
We hope the scheme will still help borrowers in need, but losing 10% of the value of their home may prove unpalatable. The government is slowly abdicating from a role in providing a safety net for borrowers, just when arrears levels are about to rise.