Lenders stick up for Mortgage Rescue Scheme

03/07/2009

The Mortgage Rescue Scheme has been defended by lenders following the recent revelations over its lack of success so far.

According to recent government figures, the £200 million plan had helped just six households by the end of May - despite its stated aim of helping over 6,000 households.

The scheme works by helping at-risk homeowners renegotiate the terms of their mortgage loan so that they can avoid repossession.

Liberal Democrat shadow chancellor Vince Cable termed the scheme "pitiful" earlier this week.

However, the Council for Mortgage Lenders (CML) said that although takeup has been "slow" the scheme should help increasing numbers of people over the months ahead.

"It was always going to take some time to consider individual cases because there are lots of individual factors that need to be taken into account to determine whether or not mortgage rescue is the right option for a borrower in difficulty," Bernard Clarke, communications manager at the CML, said.

"A slow take-up in terms of the number of people accepted into the scheme is probably what we would have expected."

Kevin Still at EuroDebt sharply criticized the scheme.

"The number of people being helped is totally out-of-step and proportion with the volumes of people in serious financial difficulty and being threatened with re-possession," he said.

"As with bankruptcies volumes, we accept that there may be a deferred effect as we progress through the recession, but the fact that only six households have been helped relative to an expectation of one thousand times that number is unbelievable. Secured creditors and debt advice agencies need to more effectively collaborate to rapidly deal with the circumstances of homeowners in genuine financial difficulty, as defined by the Banking Code, who have pro-actively sought help and are trying to reach a viable agreement with their creditors, both secured and unsecured.

Mr Still added: "There must be some light at the end of the tunnel and people that may have historically been excellent borrowers must be given an opportunity in a few years to obtain high street credit when circumstances improve. Debt forgiveness for the banks, but long-term social exclusion for many borrowers is not a fair balance."

Tags; Housing Debt and Bills, Young Family Finances,

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