Mortgage rescue scheme helps only six households

Saturday, 8 August 2009 12:01 AM

By Liz Stephens

The government's mortgage rescue scheme, which has designed to help households avoid repossession has so far only directly benefited six homeowners according to MPs.

The treasury committee reported that the scheme, which was designed to assist upwards of 6,000 households, appears to be "out of step".

The committee called on the Treasury and the Department of Communities and Local Government to explain why only six households had successfully benefitted from the scheme.

John McFall, chairman of the committee said: "I am looking for answers as to why this is the case and whether low take up reflects poor scheme design or an inability to forecast take-up."

The committee also criticised the Financial Services Authority (FSA) for not doing a better job to protect households affected by the recession and struggling with mortgage arrears from unethical lenders.

It accuses the FSA being "more interested in protecting lenders who are treating their customers unfairly and that it is placing the interests of lenders above those of consumers."

The committee found that while many mainstream lenders are taking steps to support customers, some lenders in the sub-prime, specialist and second charge sectors were "using repossession not as a tool of last resort, but instead of first resort."

Mr McFall said: "This is clearly unacceptable - the FSA and the OFT must get a grip on this problem and crack down on lenders who are breaking the rules and mistreating customers in arrears."

The committee said it had heard evidence that some lenders charge excessive mortgage arrears fees to customers who fall into mortgage difficulties - in some case charging as much as £35 for sending a letter or making a phonecall.

It called on the FSA and the Office of Fair Trading (OFT) to review all mortgage arrears charges made by mortgage providers and secured lenders to determine whether they are reasonable.

Tags:
• economy
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• economy and finance
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• recession