Housing associations 'integral' to Lib Dem mortgage rescue plans » Housing » 24dash.com

The Liberal Democrats today unveiled proposals to help families who are unable to pay their mortgages.

Treasury spokesman Vince Cable said changes were needed urgently to stop the "downward spiral" of Britain's housing market.

Proposals include a mortgage rescue scheme, which would allow families struggling with repayments to sell all or part of their house to a housing association or private firm and then stay in the property as tenants.

The Government should also allow councils and housing associations to borrow money to buy up land and empty new homes "to help replenish Britain's much depleted stock of social housing", the Lib Dems said.

Mr Cable urged Justice Secretary Jack Straw to give guidelines to the courts so that homes can only be repossessed in extreme circumstances.

He said: "The Government seems obsessed with fighting a losing battle to artificially prop up the housing market, rather than finding ways to deal with its worst effects.

"Ministers must act to help the thousands of families struggling to keep a roof over their heads."

The plans could be funded using Government money already committed to social housing but currently unspent due to the collapse of new building, Mr Cable said.

The Lib Dems' call came as Taylor Wimpey, the UK's biggest housebuilder, racked up half-year losses of £1.54 billion after market turmoil caused it to slash the value of its land bank.

The firm's underlying profits plunged 96% to £4.3 million during the six months to June 30, with house sales down nearly a third. Rivals Persimmon and Bovis Homes have also revealed massive half-year profit slumps as the industry grapples with a mortgage squeeze and battered consumer confidence.

House prices have continually fallen since last autumn, putting millions of people in negative equity.

A recent survey by Shelter found that 1 million households spend more than two-thirds of their income on housing.

The number of repossessions and repossession claims have more than doubled in the last five years, the Lib Dems said.

And the number of households on social housing waiting lists increased by almost 70% to 1.67 million between 1997 and 2006.

A spokesman for the Department of Communities and Local Government said ministers were determined to do "everything possible" to promote long-term stability and fairness in the housing market.

He said: "The international credit crunch has created significant challenges not just for the UK housing market, but in other parts of Europe and the United States.

"That is why we are putting measures in place to support industry, including more funding to buy unsold homes.

"At the same time, we are taking action to support the small minority of borrowers who may be facing difficulties because of current market conditions.

"As well as expanding free legal representation in county courts for households at risk of repossession, we are providing more free debt advice, and are working closely with lenders to ensure that repossession is only ever a last resort."

The chief executive of the National Housing Federation - the trade body representing England's housing associations - said he was "delighted" the Lib Dems had adopted its proposals for a mortgage rescue scheme.

David Orr said: "There are already four million people stuck on waiting lists for affordable homes and the Government must ensure more people do not join it as a result of having their homes repossessed.

"The mortgage rescue service would give people struggling to keep up with their repayments a lifeline by allowing them to sell their home at a fair price and then rent it back from the housing association for as long as they like.

"We're delighted the Liberal Democrats have adopted our proposals; the Government now needs to do the same and give a lifeline to thousands of families at risk of losing their homes."

The downturn in the housing market has seen a number of unregulated firms offering to buy properties from people struggling to pay their mortgages, but usually for prices well below the market value, according to the National Housing Federation.

Adam Sampson, chief executive of Shelter, said: "The Liberal Democrats have set out a very positive package that would go a long way to helping thousands of struggling homeowners and potentially kick start the flagging house building industry.

"However, this cannot be delivered using money already earmarked for the delivery of social house building as suggested, but extra money must be found to help prop up house builders, first-time buyers and the housing market as a whole and not at the expense of social housing."

Gordon Brown should pay close attention to the Lib Dems' proposals and commit the additional funds needed, Mr Sampson said.

Margarita Morrison, managing director of the Scottish arm of Home, one of the UK's largest housing associations, said: "At a time of great uncertainty and worry for families, this proposal has merit in that we require to add all sensible and well thought-out proposals to the basket of measures to assist families in retaining existing housing with affordable means, whilst we continue to house people in need on our waiting lists."