The cost-of-living crisis is having a real impact on everyone, with many challenges across the whole of our society. The cumulative impact of the significant rise in fuel cost, high inflation, escalating rent and house prices, with incomes often not keeping pace has led to many homeowners struggling to pay their mortgages.
Previously in 2022-23 and 2023-24, the Welsh Government provided more than £3.3 billion of support to help people who are struggling with the cost of living through targeted programmes which put back money into people’s pockets. Additionally, as part of the 2023-24 budget agreement with Plaid Cymru, £40 million of repayable capital funding has been made available over the next two years to bring forward schemes to provide flexible financial support.
The Bank of England’s 12 consecutive interest rate hikes in the past 18 months have led to significantly increased costs of borrowing. This is a concern for many and is seen across the lending market whether that is in relation to mortgage lending, private rent increases (as a result of buy to let mortgage rises), higher interest loans for businesses or the financing of new social homes.
According to the figures from UK Finance, about 800,000 fixed mortgages will expire before the end of this year, with a further 1.6m coming to an end in 2024. The figures do not include variable rate and tracker mortgages, which will already have risen sharply leading to higher payments.
Today, in order to support households who are hardest hit by the cost of living crisis, I am pleased to announce the launch of the Help to Stay Wales mortgage support scheme. The overall aim of the scheme is to provide a low-cost equity loan to eligible applicants in order to reduce their existing monthly mortgage payments to an affordable level, allowing homeowners to continue to live in and own their homes. It will also provide time for them to resolve their underlying financial issues, which may reduce the risk of repossession and homelessness.
The low-cost equity loan will be secured by a second charge (behind first charge lender), reducing revised mortgage repayments to a level the applicant can afford.
Eligible Applicants will undergo a financial assessment by an Independent Mortgage Advisor, who will determine the most appropriate course of action. If the Independent Mortgage Advisor concludes that the most appropriate option for the applicant is an equity loan, their application will be progressed under the scheme.
Most current schemes require people to already be in possession proceedings to qualify, however Help to Stay will extend this to include those facing possession proceedings and/or financial hardship, therefore this widening of our current mortgage rescue offering can support those at an earlier stage of financial difficulty rather than only those who are threatened with repossession. This includes providing support to those who are trapped on a standard variable product and unable to arrange an affordable new mortgage.
The Resolution Foundation says that annual repayments are set to be £15.8 billion a year higher by 2026 compared to December 2021, when the Bank of England started raising interest rates. Annual repayments for people re-mortgaging next year are set to rise by £2,900 on average. Furthermore, mortgage and landlord possession statistics from April to June 2023 show that, compared to the same quarter in 2022, mortgage possession claims increased by 15%. Therefore, by acting now with increased investment, we can prevent many individuals and families from entering possession proceedings and becoming homeless, adding to the already stressed waiting lists and high temporary accommodation costs for Local Authorities.
The scheme may be able to help you if you meet the following criteria:
- Your household is either in, or facing, mortgage difficulty and you are at risk of losing your home.
- The property is in Wales.
- The property is valued at £300,000 or less.
- The property is subject to only one existing legal charge by your first charge mortgage lender.
- The applicant is the owner of the property and it is their primary or sole residence.
- The total household income is not greater that £67,000 per annum.
More information about Help to Stay Wales can be found on the Welsh Government Website: Help to Stay – Wales | GOV.WALES