Expert criticises government’s mortgage plans

Written by admin on December 5th, 2010

An expert has questioned the government’s decision to cut spending on the Mortgage Rescue Scheme.

The government’s recent announcement that it is to reduce funding on a home credit scheme designed to aid struggling homeowners has come at a bad time, an expert has said.

According to Paula John, editor of Your Mortgage, people seeking to compare savings and secure a mortgage will suffer following housing minister Grant Shapps’ speech given last week (July 20th) in which he stated that the Mortgage Rescue Scheme (MRS) would not be continuing with its current level of financing.

The minister said the programme would be maintained, but added that it would have to be “refocused to deliver better value for money, with a reduction in the grant rate paid to housing associations”.

Since being launched in April of last year, research suggests that the MRS has had a positive influence on the country’s home credit market as it has scrutinised lender practice and mortgage arrears management.

However, statistically it has only actually helped 34 homeowners in the 15-month period it has been active, a figure which has prompted the government to cut its funding at first so that it can remain in place to protect against any interest rate rise before finishing it completely at the end of the current financial year.

Nevertheless, despite admitting that spending cuts are important and unavoidable as the UK emerges from recession, Ms John has questioned whether the government has picked the right area in which to make these savings, as the decision is “not one of comfort” to many homeowners who have been affected by the recession.

She went on to state that more cuts in the public sector are likely to further damage peoples’ ability to repay their mortgage and added that shedding money from the MRS is “incredibly bad timing” as more, not less, support is required at tough financial times.

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