Experts say axing the scheme would put thousands at risk of being turfed out on the street.
The Department for Communities and Local Government said today that the Mortgage Rescue Scheme would suffer spending cuts as part of a wider review into mortgage support schemes offered by the government, and the Autumn Spending Review would decide the future of the scheme.
The news comes on the same day as a study of arrears and possessions showed that the number of people losing their homes could spiral over the coming years, with a worst case scenario of 175,000 out on the street in 2012 if unemployment peaks at 11.4% in 2011.
The report from Professor John Muellbauer and Dr Janine Aron of Oxford University said repossessions are likely to hit between 40,000 and 60,000 per year while the Council of Mortgage Lenders’ latest forecast is that there will be 53,000 repossessions in 2010.
The Oxford report also shows that the combination of greater tolerance from lenders and government schemes on offer has had a notable effect in helping homeowners stay in their homes.
But housing minister Grant Shapps announced this morning that on top of the spending cuts to the MRS the Homeowners Mortgage Support Scheme, which has only helped 34 people since its launch in April 2009, will be axed at the end of the financial year.
Eric Stoclet, managing director of Crown Mortgage Management, said: “Cutting back on the Mortgage Rescue Scheme is bad news for homeowners who get into financial difficulties. For many servicers, the Mortgage Rescue Scheme has been an important tool in helping to prevent borrowers in arrears from losing their homes during the economic downturn – and in providing options for those who cannot sustain a mortgage.
“With large-scale redundancies anticipated, particularly in the public sector, it is also likely that more households will feel financial strain and more homeowners will struggle to meet their mortgage payments. At this pivotal stage, it is crucial that the government maintains the scheme when it carries out its forthcoming spending review.”
In September 2009 the MRS developed a “Fast Track Team” to help fast-track cases from referral to completion. A central case management team takes referrals direct from lenders and ‘strips down’ the processes to the bare essentials to speed up process times and increase volumes.
As at December 2009, the Fast Track team had taken over 750 referrals direct from lenders, with the BBC stating that another 1,849 applications are ongoing by the end of March this year.