Clik here to view.
National Audit Office has criticised the government programme for helping half the number of households it promised to rescue
A government scheme to help struggling mortgage borrowers stay in their homes has been criticised by the National Audit Office for helping less than half the expected households at a cost of nearly £100,000 each.
The mortgage rescue scheme, introduced in January 2009 by the Department for Communities and Local Government (DCLG), helped 2,600 households in two years, less than half the 6,000 expected. It also exceeded the budget of £205m by £35m, meaning the average cost of each rescue was £93,000 compared to an expected cost of £34,000.
The scheme offered homeowners who were in imminent danger of repossession the choice of an equity loan to help reduce their monthly mortgage costs, or to have their home bought by a housing association and stay on as the tenant.
The NAO said the DCLG misjudged the levels of demand for the two choices, believing most households would choose an equity loan – the cheaper option for the taxpayer. In reality, nearly all households chose the more expensive route of selling their house to a housing association. This was possibly because they had no equity left in their homes to borrow against.
Amyas Morse, head of the NAO, said: "The department made assumptions about the level of demand for the mortgage rescue scheme and made the wrong call. Spending more than expected and delivering less means the department has not provided value for money."
Housing minister Grant Shapps said: "One of my first decisions in government was to insist on better value for money from this £240m scheme. In the last government, ministers believed that all you needed to do was throw money at a problem. The great sadness is that more people could have been helped to stay in their homes had they spent the money more wisely."
But a recent Council of Mortgage Lenders report said that while house repossessions were up by 15% in the first quarter of 2011, the mortgage rescue scheme helped 5,039 households receive help and advice from their local authority in the first three months of 2011.
Campbell Robb, chief executive of Shelter said: "When judging the success of this scheme it's important to remember it encouraged almost 40,000 struggling homeowners to seek help and as a result many kept their home. Many of these people got advice from organisations like Shelter, and our research shows that over half of those who came to us via this scheme managed to keep their home as a result."
Peter Tutton, social policy officer for Citizens Advice agreed: "The scheme was always going to be low volume and expensive, because it was designed for some of the most vulnerable people in the UK – those with children and disabilities – becoming homeless. It's hard to criticise DCLG staff for what they did: they really pitched in to get solutions, and the very fact that the scheme existed meant lenders and courts showed more forbearance."
