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Government Announcement
The recent announcement by the Government of an expansion of the mortgage-to-rent scheme is an important development for households in long-term and unsustainable mortgage arrears.
The Government’s Action Plan for Housing and Homelessness published in July 2016 identified the requirement to improve the mortgage-to-rent scheme so that it would allow more people to remain in their homes. There are a number of documented reasons for the low rate ...
Government Announcement
The recent announcement by the Government of an expansion of the mortgage-to-rent scheme is an important development for households in long-term and unsustainable mortgage arrears.
The Government’s Action Plan for Housing and Homelessness published in July 2016 identified the requirement to improve the mortgage-to-rent scheme so that it would allow more people to remain in their homes. There are a number of documented reasons for the low rate of uptake and progress on the mortgage-to-rent scheme which include the multitude of stakeholders and an overly bureaucratic process. The conversion rate since its launch has been very poor - only 217 arrangements completed with a further 635 pending.
However it is generally accepted that the rationale for the mortgage-to-rent model is sound - it allows households with unsustainable mortgages to achieve certainty of occupancy (tenure) through a long term leasing arrangement.
The most significant changes to the mortgage-to-rent scheme announced by the Government are:
- Implementation of a more centralised approach which can deliver the volumes necessary (expected to be in the thousands) to meet commercial and social requirements;
- Inclusion of a buy-back option for the household which can be triggered at any time; and
- Broadening of the eligibility criteria.
- Private finance houses will examine the loan books of banks/funds to determine the accounts that qualify for the expanded scheme.
- Eligible households will be advised of the availability of the expanded scheme and will be given the opportunity to participate.
- Access to independent legal and financial advice will be provided.
- The loans, security and related rights of eligible households will be acquired by a private finance house from participating banks/funds.
- Eligible households will remain in their homes as tenants with a guaranteed 20-year lease and a right of renewal.
- Households will have an option to buy the property back at any time at the prevailing market rate.
- The existing mortgage on the property will be discharged and the residual debt owed will be written off by the private finance house.