£285m mortgage funding gap looms

The CML says the facility, which is under threat of abolition, is popular among its members because it gives borrowers the confidence to speak out if they feel they are getting into difficulty rather than ‘burying their heads in the sand’.

The scheme allows homeowners at risk of repossession to change their tenure to shared equity or government mortgage to rent, under which a housing association buys the property and rents it back to the applicant.

Its critics, including Grant Shapps, the housing minister, point out that only a small number of people have received direct help. Eric Pickles, the new Communities and Local Government secretary, has ordered a review of the scheme.

A total of 629 people households have received a formal offer of help since the launch of mortgage rescue in January last year.

But the real number of people benefitting is higher, says the CML.

More than 20,000 people have approached local authorities under the scheme, with a total of 5,022 seeking help in the first quarter of this year.

Of these, 2,199 were deemed at risk of repossession and 2,108 were referred to the lender.

The numbers of claims leading to possession orders have halved since the scheme was launched from 28,453 in the final quarter of 2008, to 14,373, in the first three months of this year, although the decrease is also linked to a slight recovery in the market.

Sue Anderson, head of member and external relations at the CML, said: ‘There have been some unexpected tangential benefits of the mortgage rescue scheme that we do not want to disappear. Everyone who applies for mortgage rescue must be assessed by an independent money adviser and the outcome of this assessment is often that - even if the applicant is not eligible for mortgage rescue - it enables them to start a dialogue with their lender that they ordinarily wouldn’t have done.’

Campbell Robb, chief executive of Shelter, said: ‘The government must urgently reconfirm funding for homeowner support schemes and homelessness advice which is helping hundreds of thousands of people to keep a roof over their head.’

The scheme is being reviewed to ensure it offers value for money pending the emergency budget on 22 June.

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