Mortgage Rescue Scheme - 02 June 2008

May I start by thanking the four Committee members who tabled the motion giving us a very timely opportunity this afternoon to look at the issue of a Northern Ireland specific Mortgage Rescue Scheme.  Can I also thank each of the other members who contributed to the debate today and if my response fails to address any of their specific points, I will of course be happy to write to them separately.

The motion before us today calls on me to ‘investigate the establishment of a not-for-profit Mortgage Rescue Scheme’. Well Mr Speaker, I am happy to say that as far as this motion is concerned I am already well ahead of the game.

When I announced the New Housing Agenda earlier this year, I made it clear that I wanted to support people striving to stay on the housing ladder. I said then that I wanted to establish a Mortgage Rescue Scheme and would bring forward detailed proposals on how I would do this by the summer.

Whilst I still intend to publish these detailed proposals for full consultation in the coming months, I am happy today to give members some indication of what our own scheme may look like whilst addressing some of the concerns we have heard raised today.

I said at the outset that today’s debate was timely. It is timely on two counts.

During the first quarter of this year alone, 754 applications were made to the Courts here for repossession orders, a 33% increase from the same period last year. Given the very difficult economic conditions we are currently experiencing, we can only assume this trend will continue throughout the rest of this year and even into next.

However we are not alone. Across England and Wales, the number of repossession orders is expected to rise by over 50% this year. And when I was in America earlier this year, I was shocked to hear that over 1.6 million families there will have their homes repossessed this year. So whilst the problem is not unique to our shores, I am determined that the solution will be.

I have looked at different schemes not just across the United Kingdom as the motion today calls for but also further afield. When in America recently, I took the opportunity to look at how they were dealing with the problem. I have also listened carefully to the views of our own housing experts, particularly those in Housing Rights Service here in Belfast who work day and daily with those in danger of losing their homes. I am satisfied that, having taken into account all of the various issues, we now have the basis of a scheme that will be unique to Northern Ireland and tailored to meet our own specific needs.

I plan to introduce a ‘Mortgage to Rent’ scheme for those homeowners who can no longer afford to own their home. Eligible homes will be purchased by a Housing Association who will rent them back to their former owners, offering long term security both in terms of affordability and lease.

For those who are struggling to meet the full mortgage on their property, I will bring forward a scheme similar to co-ownership, only in reverse.  I will allow Housing Associations to buy a stake in the home and convert that stake to an affordable rent, allowing the family to retain some form of ownership in their home with the prospect to buy it all back if and when their circumstances permit.

But this is just one aspect of what our Mortgage Rescue Scheme will seek to deliver.

For those who fall behind in their mortgage, the best and by far the easiest way to avoid a repossession order is to seek help and get advice sooner rather than later. The earlier advice is sought, the more solutions there can be.

That is why I will be insisting that all applicants for our Mortgage Rescue Scheme must seek specialist advice that is already offered freely across a range of advice providers here. And I intend to help with ensuring that the very best advice and support is available.

However there is also a role in all of this for our financial institutions and lenders and that is the second reason why today’s debate is timely.

Tomorrow afternoon, I am due to speak to the Council of Mortgage Lenders here in Belfast.  We can not escape the fact that many of today’s problems are down to some lenders, usually sub-prime lenders, encouraging people to borrow more than they can afford to repay.

The sharp increase in repossessions today is the price we are paying for bad lending and yes, bad borrowing from yesterday.  In the last 4 years, the average price of a house here has risen by 74%. Accordingly the average mortgage taken out has increased by 61%. Yet average incomes have not risen by anywhere near as much.

Based on these figures, we can not be surprised that more and more people are in danger of over-committing themselves.

So tomorrow, I will be asking the Council of Mortgage Lenders to work with me on this. I will specifically ask them to look sympathetically towards those who may default on their mortgages in the coming months as the effects of the wider economic problems hit harder. I will also ask them to look at how they communicate with their customers when the potential for default is first identified.

I think they can be persuaded that patience and compassion is not only the right approach but also over time makes good business sense.

I was pleased to see that today’s motion called for a ‘not-for-profit’ scheme to be investigated and I would support nothing other than that.

I have become increasingly concerned at reports of private companies who offer their own brand of a ‘sale and rent back scheme’. These schemes may be helpful for some clients, but frankly I am concerned that consumers are not being given the opportunity to make well informed choices during what are undoubtedly very difficult times for them.

Members may be interested to know that the Office of Fair Trading is currently looking into these sorts of transactions and we can expect their report by September.

Personally speaking, I would like to see these companies regulated, but in bringing forward our own not for profit scheme, we may be able to do better than that and remove the vacuum that currently exists for them to operate so freely within.

Finally Mr Speaker, our plans will obviously require funding. While I have some modest resource in the context of a tight budgetary situation, I will be submitting a bid later this week to the Minister of Finance for an additional £5m to fund this Mortgage Rescue Scheme. This is a new scheme to Northern Ireland and one that is needed now more than ever before.

As I said earlier, in the coming months I will publish my detailed proposals and am confident that with the support of this Assembly here today, I can put forward a strong and convincing case to fund these.

Mr Speaker I welcome today’s motion and, it goes without saying, I welcome a strong vote of support for the work I have already undertaken to deliver these proposals. My proposals, if properly funded, have the potential to make a very positive impact on the lives of so many families currently facing tough times.