Mortgage Rescue Scheme

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Mortgage Rescue Scheme
What is it?
A new £200m package of measures designed to prevent some of the most vulnerable families losing their homes and experiencing the trauma of repossession. This scheme is aimed at those who would be eligible for homelessness assistance and is subject to a range of eligibility criteria. £200m will avoid up to 6,000 repossessions across England.

Our mortgage rescue package has two elements
Shared equity
This is designed to help householders who have experienced payment shocks and need some help in paying their mortgage.

Government Mortgage to Rent
This is designed to help the most vulnerable households on low incomes with little chance of sustaining a mortgage.
Why are we doing it?
The international market turbulence is creating a challenging environment in the housing market, interest rates have risen and the government is determined to take action to help those facing repossession. These measures build on our existing work, which includes £10m for guidance and an expanded network of court desks to provide legal advice for households at risk of repossession. But we are now going further to launch up to 6,000 mortgage rescues for those most likely to need state assistance were they to be repossessed.

How will it work?
Mortgage Rescue will operate by bringing together local authorities, Registered Social Landlords (RSL), lenders and debt advice agencies. The two elements work in the following ways:

Shared equity - RSL provides an equity loan enabling the householders' mortgage repayments to be reduced.
Government Mortgage to Rent - RSL clears the secured debt completely and the applicant pays rent to the RSL at a level they can afford.
The level of grant to a RSL will be determined using the Homes and Communities Agency's value for money assessment criteria after a Money Adviser has advised on the most appropriate route after establishing a household's affordable housing costs.

Who will it help (and how many)?
This scheme will not help those who are in negative equity. It is subject to a set of eligibility tests. Depending on individual circumstances, there are two possible options for those eligible:

Shared equity
Those who have an equity share in their homes and are facing a payment shock from remortgaging and/or higher living costs but likely to retain current income.

Government Mortgage to Rent
Those who are unable to meet lenders' requirements eg those on unstable incomes. Those who are more suited to social tenancies.
The scheme aims to help up to 6,000 vulnerable households over two years.

We have worked with the Council of Mortgage Lenders (CML), the Housing Corporation (now the Homes and Communities Agency), the National Housing Federation, local authorities, Money Advice agencies, and RSLs to develop the mortgage rescue proposal.

It was announced as part of the Pre-Budget Report on 25 November 2008 that the scheme had been enhanced to cover vulnerable families at risk of repossession because of additional loans secured on their home. Often families are more likely to default on these loans because of higher interest rates.

When is it available?
Communities and Local Government has worked alongside experts from the lending sector, local authorities, money advice sector and Registered Social Landlords to ensure that the Mortgage Rescue scheme was available as quickly as possible. Housing Minister Margaret Beckett announced on 16 January 2009 that this scheme is now available in all participating local authorities. There are 80 local authorities that have been fast tracking delivery of the scheme and have been taking applications since December 2008.