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Watchdog slams mortgage rescue failure

Wednesday, 25 May 2011 3:57 PM

A mortgage rescue scheme designed to stop home owners being repossessed helped less than half the number of people the government hoped and cost £35 million more than budgeted.

A report out today from the National Audit Office (NAO), the government’s financial watchdog, says the Department for Communities and Local Government did not adequately test the assumptions behind the scheme’s business case and that it could have acted earlier to improve value for money.

The mortgage rescue scheme was launched in January 2009 in a bid to help 6,000 households at a cost of £205 million. Vulnerable households who qualified could apply for an equity loan to reduce their monthly mortgage payments but still own their homes or they could ask a housing association to buy their home and become a tenant.

However, the NAO says far more people opted for the more expensive option of becoming a tenant than the department expected. That meant only 2,600 households were helped at a cost of £240 million over the two years of the scheme.

Amyas Morse, head of the National Audit Office, said: "The Department made assumptions about the level of demand for the Mortgage Rescue Scheme and made the wrong call. There was more need than expected for more expensive support and less for the relatively low cost rescue option.

“Spending more than expected and delivering less means that the Department has not provided value for money."

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