Mortgage rescue 'missed targets', says Audit Office

Image caption The scheme was aimed at those facing the threat of having their homes repossessed

A scheme aimed at preventing people losing their homes in England proved to be below target but above budget, a report has concluded.

The Mortgage Rescue Scheme enabled not-for-profit housing associations to buy a stake or all of a home and allow the residents to continue living there by renting it back.

The National Audit Office (NAO) said it helped 2,600 households avoid having their homes repossessed.

However, the target was 6,000.

The rescues were also supposed to cost a total of £205m, but actually cost more than £240m, the NAO found.

"The scheme has helped fewer than half the number of households expected and each rescue has cost more than three times as much as expected, with overall costs sitting at £240m," said Margaret Hodge, who chairs the Public Accounts Committee.

"Spending £35m more than planned yet not reaching all those in need does not represent value for money for taxpayers' investment in this scheme."


The scheme was launched by the Labour government in 2008, following a surge in the number of homes being repossessed because people were unable to continue with mortgage payments.

Economic conditions also prompted the introduction of the scheme, which was administered by local authorities and overseen by the Department for Communities and Local Government (DCLG).

The NAO has studied the success of the scheme in England, which was separate from a scheme in Scotland, which started in 2003, and one in Wales.

It found that the DCLG "made the wrong call" when predicting how many people would choose to relinquish ownership of their home and rent it back from a housing association, compared with the numbers who would opt for shared ownership with the housing association.

Some 98.5% of those on the scheme chose to sell their home, whereas the original estimate was that only 15% of people on the scheme would do so.

The report said the DCLG did not have detailed, up-to-date information on its target group and whether they had sufficient equity to share ownership with a housing association.

The department also failed to draw sufficiently on data from the scheme in Scotland.

"The department made assumptions about the level of demand for the Mortgage Rescue Scheme and made the wrong call," said Amyas Morse, head of the National Audit Office.

"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."

A spokeswoman for the DCLG said that lessons were taken from the programme, but that it was beneficial to many people.

"The Mortgage Rescue Scheme was introduced at a time of global financial turbulence and housing market uncertainty, and when forecasts indicated that the number of annual repossessions could reach 75,000," she said.

"The NAO have clearly identified shortcomings in the scheme that was launched at such a challenging and uncertain time. But the report also confirms our view that despite some failings overall the scheme has made an impact helping prevent repossessions and homelessness - a view also shared by many advice agencies, lenders and local authorities across the country."

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