Call for mortgage rescue scheme

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A mortgage rescue scheme could be established in Northern Ireland to help borrowers at risk of losing their homes, a Government review has said.

Around 32,000 households are expected to experience difficulties by 2018 due to negative equity and spending a large chunk of income on servicing mortgages, according to a report commissioned by the Department for Social Development (DSD).

Funding for debt advice in Northern Ireland is set to increase by a third and services may be simplified to tackle the problem.

The report said mortgage rescue schemes allowed households to either reduce their equity share or to remain in their home as tenants of a housing association.

“The experience of Scotland in particular has shown the scheme to be an effective last resort option for the most vulnerable homeowners,” it said.

“Strict eligibility criteria may limit the direct number of beneficiaries; however, including the products in the ‘shop window’ of advice agencies has increased the number of borrowers seeking help.”

It said constraints on public expenditure will fundamentally shape the viability and development of a rescue scheme.

But the panel added: “The taskforce recommends that the Northern Ireland Federation of Housing Associations (NIFHA) is commissioned to complete a feasibility study and options appraisal on a potential mortgage rescue scheme in Northern Ireland with findings to be reported in spring 2015.”

The Housing Repossessions Taskforce also recommended establishing a mortgage options hub giving free advice, promoting earlier intervention and simplifying existing services ahead of anticipated interest rate rises which are expected to hit Northern Ireland homeowners hardest.

A hub would ensure the best support is available for individuals and families facing repossession by harmonising advice provision and supporting lenders in treating customers fairly.

The taskforce made proposals encouraging banks to engage with distressed borrowers earlier, providing more money for support services and ensuring borrowers acted earlier to tackle unsustainable debt.

The report said: “The current picture of advice provision, with numerous generalist advice agencies providing debt-related advice, is confusing for individuals in need and there is a clear case for developing a well-marketed single point of initial contact on debt advice with stronger arrangements for escalating mortgage debt cases to the Mortgage Debt Advice Service at the earliest possible point.”

It is envisaged the amount of government funding for advice will grow from £225,000 this year to at least £340,000, according to the panel of experts.

A combination of a growing number of households with little cash to spare with existing levels of “mortgage prisoners” who cannot move because their houses are worth less than their loans significantly increases the number of at-risk households, the taskforce said, from 15,000 last year to 32,000 by 2018.

It is estimated that the number of households spending more than a third of income servicing repayments who are also mortgage prisoners will double by 2018 – representing 16 per cent of all households with mortgages.

The increasing number within this high risk bracket may lead to Northern Ireland’s repossession rate continuing to outstrip other UK regions, the taskforce said.

Most cases are dealt with through court-ordered repossessions without the borrower present but the expert panel said it wanted to encourage “soft landings” out of homeownership like voluntary sales.

Currently many repossessed homes go to auction, sell for significantly less than their market price and leave an overhang of debt which the former owner still has to address or go bankrupt, the report said.

Other taskforce recommendations included:

l Funding for the Mortgage Debt Advice Service should be increased to meet rising demand.

l The “nudge unit” should consider encouraging borrowers to engage earlier, cutting the cost of intervention and potentially preventing court proceedings.