A new scheme from Welsh Government could help hundreds of home owners in Wales who are struggling with soaring mortgage costs.
The Help to Stay Wales mortgage support scheme will offer equity loans to struggling owners for up to 15 years that will be interest-free for the first five years.
As part of the Co-operation Agreement between the Welsh Government and Plaid Cymru, a commitment was made to explore local authority mortgages. Help to Stay Wales Scheme has been considered as part of discussions about the mortgage market and how we can provide targeted support.
As part of the budget agreement with Plaid Cymru for 2023-24, £40 million repayable capital funding has been made available over this year and next year to bring forward schemes to provide flexible financial support.
Help will be available for up to 450 struggling borrowers. People with a household income of up to £67,000 and homes worth up to £300,000 could be eligible but the scheme will pay for independent financial advice to check if it is right for them.
Help to Stay Wales will work alongside support offered by mortgage providers through the UK Mortgage Charter for customers who are struggling to afford their mortgage payments.
The scheme will provide an option for homeowners who are at serious risk of losing their home by offering a partial repayment of an existing mortgage balance via a low-cost equity loan, secured by a second charge (behind first charge lender), reducing revised mortgage repayments to a level the applicant can afford.
The scheme will be operated by the Development Bank of Wales and will be interest free for the first five years. After that, the equity loan will be charged at 2 per cent above the Bank of England base rate.
The purpose of the scheme is to reduce the number of homeowners at risk of repossession and homelessness by offering them time to resolve their underlying financial issues.
Mortgage Rescue, which has operated in Wales since 2008, is still available and remains a valuable last resort, but requires people to already be in possession proceedings to qualify for support. Help to Stay Wales will extend this to include those facing possession proceedings and/or financial hardship.
Welsh Government hopes that by acting now with increased investment it can prevent many people entering possession proceedings and becoming homeless, adding to the already stressed waiting lists and high temporary accommodation costs for local authorities.
Minister for climate change Julie James said: ‘The current economic climate presents many challenges for homeowners as they face the significant rise in fuel costs, high inflation, escalating rent and house prices with incomes often not keeping pace.
‘The aim of the Help to Stay Wales Scheme is to help homeowners to continue living in their precious homes.
‘By widening our current mortgage rescue offer, we have the opportunity to help more people at an earlier stage before they face the awful threat of repossession.
‘I would like to thank UK Finance and mortgage lenders who are already supporting the scheme, and I hope more lenders will be able provide their support over the coming weeks.
‘We will continue to do all we can with the powers we have to help protect vulnerable households through this cost-of-living crisis.’
Designated member, Siân Gwenllian said: ‘The detailed work undertaken through the Co-operation Agreement on the mortgage market has led to the creation of Help to Stay Wales to support people affected by soaring interest rates.
‘By utilising the financial institutions and the powers we currently have in Wales, we have been able to create a Made in Wales solution which will provide direct support to those facing the greatest difficulties.
‘This new, targeted support will help more people at an earlier stage, not just those threatened with repossession, meaning they can stay in their homes and help them avoid the stress of not being able to pay their mortgage.
‘Despite having limited powers and resources in this area, our hope is that the direct support being provided in Wales will provide an additional safety net to mitigate some of the worse effects of the unfairness of the conditions created in Westminster.’
Chief executive of Shelter Cymru, Ruth Power, said: ‘We’ve been campaigning for more support for homeowners struggling with their mortgage repayments, who are one of the many groups at risk of homelessness and seeking support from Shelter Cymru.
‘We welcome any initiatives that get upstream to prevent homelessness and widen the safety net for households facing a cost of housing and cost-of-living crisis. This scheme will offer eligible households assistance from the early point of arrears accruing, rather than waiting until they face the incredible stress of repossession. We must now ensure that as many households as possible have the option to use it to stay in their homes, learning from people at risk of homelessness how best such a scheme can help them.
‘Anyone at immediate risk of losing their home can contact Shelter Cymru’s helpline on 08000 495 495 for independent advice.’