Sub-prime lending dominated bail out

More than 70 per cent of the 1,348 referrals to the ‘fast-track’ team of Whitehall officials charged with accelerating the £285 million rescue scheme were from specialist or sub-prime lenders, a report released last week shows. Sixty per cent of the 3,343 referrals from councils were also from sub-prime lenders, despite the fact such lenders make up just 2 to 3 per cent of the total mortgage market.

People who bought their homes under the right to buy were also identified as a group which made significant use of the rescue scheme, the study indicated. A third of the 32 borrowers interviewed by researchers bought their homes under the right to buy. Around 20 per cent of owner-occupied stock was bought under the same homeownership programme.

The report also detailed how the rescue scheme was dogged by delays when it was initially set up in January 2009 - partly due to the speed at which it was developed. At the last count, 629 applications for mortgage rescue had been completed. Under the scheme, applicants are allowed to stay in their home after selling either a share of the equity or the whole of their home to a participating housing association. The vast majority - 613 - went for the latter option, the research showed.

The government last week announced a scaling back of funding for mortgage rescue. Its fate will be decided in the spending review.

Housing associations, advisors and lenders told researchers that the programme’s performance ranged from very good to very poor. ‘Some councils are excellent and some councils haven’t the foggiest,’ one housing advisor told researchers.

One lender described the throughput of schemes as a nightmare. ‘Participants frequently noted that it was difficult to contact the fast-track team by telephone,’ the report stated.

Marilyn DiCara, sales director at housing association Moat, one of 14 housing associations co-ordinating the rescue scheme, said it was now bedded in. ‘We consider each case on its own merit. It is a very careful process,’ she added.

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