Mortgage rescue schemes 'a failure'

SCHEMES backed by the Government which were set up last year to stem the rising tide of home repossessions have done little to help debt-laden owners, according to a report by the Joseph Rowntree Foundation.

Mortgage lenders hoped that 40,000 homeowners would be saved from repossession as a result of measures.

A key aspect of the package was to have the mortgage interest element of income support paid direct to lenders, but the report predicts that barely one in ten buyers with arrears is likely to be helped.

Only 20 per cent of those in the survey were receiving income support and nearly half of those were already passing on the mortgage element of that to the lender.

Rowntree calls for the introduction of a mortgage benefit to help low-income home owners who do not qualify for mortgage assistance through income support. The benefit would mirror housing benefit, which is available to those renting homes.

Tim Melville-Ross, chief executive of the Nationwide Building Society and chairman of the Council of Mortgage Lenders, welcomed the report. He says the Government could foot the estimated pounds 800m bill for a mortgage benefit scheme partly from the reintroduced stamp duty on property purchases.

The researchers talked to 302 Nationwide Building Society borrowers in arrears. Unemployment emerged as an important factor in some cases but was not as big an influence as might have been expected.

Most interviewed were working. The average net income of households surveyed was pounds 200 a week, but in 18 per cent of cases, mortgage interest payments were greater than income.

The report said: 'More than half the respondent households were employed or self-employed and so typically ineligible for income support and mortgage interest payments.'

More than 30 per cent of the households, excluding those claiming income support, would be eligible for a mortgage benefit, averaging pounds 47 a week.

The Rowntree report also estimated that as many as 40,000 homes may have been abandoned by owners who have not even handed back keys to the lenders.

Tony Baldry, Under-Secretary of State at the Department of the Environment, denied the mortgage rescue schemes had been a failure, saying repossessions and short-term arrears were falling.

Inland Revenue figures yesterday showed housing transactions in May - at 83,000 - were the lowest since figures were first published in the late Seventies.