Housing Associations responding to the credit crunch mortgage rescue

1
Housing Associations responding to the credit
crunch mortgage rescue

• Lucy Thornycroft
• National Housing Federation
• Responsible Credit Conference
• 14 November 2008

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National Housing Federation

• We support and promote the work that housing
  associations do and campaign for better housing
  and neighbourhoods

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The credit crunch impact on housing
associations and affordable housing

• Mortgage availability and need for deposits
• Housing association business model
• Supply of new affordable housing
• Unsold private developer stock
• Mortgage repossessions on the increase
• Demand for affordable housing at an all time high

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Housing association proposals on housing market
downturn

• Maximise the opportunities available for
  affordable housing development
• Social housing grant used to provide high quality
  family sized homes suitable for social rent
• Housing associations should be supported in
  developing mortgage rescue schemes

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Why mortgage rescue?

• CML estimates 45,000 repossessions this year
• - a 66 per cent rise
• Allow households stay in their home and avoid the
  trauma of repossession
• Release equity to pay off any outstanding debts
• Ethical alternative to private sale and leaseback
  schemes
• Value for money for the public purse
• Apply affordable home ownership model to help
  some households facing repossession

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Affordable home ownership in England - what is
on offer

• Shared ownership - part buy, part rent model that
  allows customers to staircase to 100
  ownership. Customer can buy a share of a new
  build property from 25-75 and pays an affordable
  rent on remainder
• Shared equity - housing association provides a
  flexible equity loan. Purchaser has full legal
  title to the property but is able to reduce their
  outgoings by giving up rights to part of the
  equity in their home. Customers can buy a home on
  the open market and get an equity loan of between
  15 and 50 of the value of the property at a low
  interest rate

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How would mortgage rescue work?

• Owners occupiers facing repossession can apply
  for Government mortgage rescue scheme. Debt
  assessment by advice agency determines how a
  housing association can help them stay in their
  home through either
• Shared equity to reduce mortgage repayments
  housing association provides an equity loan to
  enable household to reduce housing cost
• Mortgage to rent housing association buys the
  property at market value and households remains
  in situ paying an affordable rent

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Mortgage rescue proposals

• Partnership approach between all stakeholders and
  contribution from lenders, Government and social
  landlords
• Broad national framework allowing local
  flexibility and delivery
• Learn from 1990s scheme
• National mortgage rescue scheme with focus on
  helping vulnerable households avoid repossession
  and contributing to homelessness prevention

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Mortgage rescue - process

• Early intervention (and quick implementation)
• Ensuring the customer is clear about the product
  they are applying for and has explored all
  alternatives
• Access to independent debt and legal advice
• Affordability assessment informs how a customer
  can be helped
• Lender freezes debt
• Local authorities take referrals and network of
  advice agencies provide advice and affordability
  assessment

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Government housing market package

• 200m mortgage rescue scheme to help 6,000 people
• New private developer shared equity product
• Reform of Income Support for Mortgage Interest
• Stamp duty land tax holiday

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Mortgage rescue - next steps

• Government have set up a delivery team and a
  mortgage rescue steering group to drive forward
  implementation
• Delivery through HomeBuy agency network
• Developing product detail
• Scheme will be operational by January

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Beyond the credit crunch?

• Light at the end of the tunnel?
• Demand for affordable housing will increase -
  affordable home ownership will continue to
  provide an essential route to home ownership
• Mortgage availability and quality will continue
  to be a huge issue customers will need to find
  large deposits
• Demand outstripping supply and increasing number
  of new households

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Contact Details

• Lucy Thornycroft
• Policy Officer, National Housing Federation
• e-mail lucyt_at_housing.org.uk
• tel [phone]