Home Owner Support
The next item of business is a statement by Stewart Maxwell on mortgage to shared equity, mortgage to rent. The minister will take questions at the end of his statement. As always, there should therefore be no interventions or interruptions.
In her statement to Parliament on 25 June last year, the Deputy First Minister announced a package of major reforms to deliver lasting improvements to Scotland's housing system, including the establishment of the new home owners support fund. Today, I will provide further detail on the fund and the actions that we are taking to help Scottish home owners in the current financial climate.
Since the June statement, the extent and impact of the international financial crisis have intensified. The crisis will not deflect us from the long-term goal of increasing the supply of new housing. We are still working to ensure that Scotland is well placed to achieve that, once market conditions improve. However, we cannot and must not ignore the immediate effects of the crisis on families and businesses across Scotland.
Due to the global credit crunch and the economic recession, many households in Scotland are finding it increasingly hard to manage their finances. Unemployment is rising, and the number of households facing mortgage arrears is rising as a result. The Council of Mortgage Lenders predicts that the number of repossessions in the United Kingdom will rise from 45,000 in 2008 to 75,000 in 2009. It also forecasts that the number of households that are more than three months in arrears will rise from 210,000 in 2008 to 500,000 by the end of this year.
Those forecasts, and the wider impact of the economic downturn on Scotland's businesses and households, are of deep concern to the Scottish Government and, I am sure, to the Scottish Parliament. That is why we have acted swiftly and decisively to introduce a series of measures that will further our affordable housing objectives, help the housing market and the house building sector, and ease the impacts of the downturn on individual households.
Our economic recovery plan to help Scotland's businesses and families proves that we will not simply sit back and wait for things to get better. In August, we published "Responding to the Changing Economic Climate—Further Action on Housing", in which we set out the challenges that face the housing market and the actions that we are taking to help to address them. Since then, we have worked tirelessly to deliver the commitments that we set out in that document. Today, we are issuing a publication in which we set out the progress that we have made since the document was published and highlight the further measures that we are taking to stimulate the economy and reduce the impacts of the credit crunch.
Over the past few months, we have allocated the first £18 million of the accelerated funding for affordable housing; invited all councils to bid for the £25 million that will quickly deliver much-needed new council homes; given a £10 million boost to the central heating programme to provide help to a greater number of households in fuel poverty this year; and put in place an energy assistance package to help to reduce bills for people who are fuel poor. In addition, in light of the considerable success of the open market shared equity pilot in Edinburgh and the Lothians, we have committed to expanding the pilot across all of Scotland with a £60 million budget in the next financial year. That will help more families to buy and stimulate the lower end of the housing market.
On 1 April, we will implement section 11 of the Homelessness etc (Scotland) Act 2003, under which lenders will be required to notify local authorities when they take legal action to call in a mortgage. The measure provides a safety net and will trigger advice and assistance to prevent homelessness. It also allows local authorities to plan general prevention services more effectively.
In addition, we are putting in place a range of measures to help Scotland's home owners who face financial difficulties. We want to ensure that everybody receives the best possible advice to help them to manage their finances and, where necessary, avert repossession. We believe that it is important that the means of accessing advice are wide and varied enough to meet the needs and personal preferences of individual home owners. To that end, we have provided £400,000 of funding for a high-profile television and online awareness-raising campaign in which the Money Advice Trust encourages people to contact the national debtline as early as possible.
We have provided an extra £1 million for citizens advice bureaux to increase the capacity of face-to-face debt advice services and made an additional £3 million available to expand our in-court advice service and other legal advice services that help people who unfortunately face a court hearing. We will increase the income limits for civil legal aid. From the spring, more than 1 million more Scots will become eligible, which means that three quarters of Scots will be able to get free or subsidised help to protect their legal rights. Furthermore, we have provided an additional £40,000 to Shelter to boost its helpline and £230,000 for its unique housing law service. We have ring fenced £250,000 in the third sector enterprise fund for credit unions to help people to access affordable credit.
Taken together, those actions will help people with money problems to achieve financial security and stay in their homes.
Of course, we do not have access to all the powers that we would like to have. In many areas, responsibility for action falls upon the UK Government. We have been pressing the Government for further actions to support the housing market and vulnerable home owners, and we will continue to do so. In particular, we have called on the UK Government to implement the Office of Fair Trading's recommendations on the regulation of sale and rent back schemes.
We have welcomed UK Government proposals to help some owners. A new home owners mortgage support scheme was announced by the Prime Minister in December. However, the limited information that we have received from the UK Government so far in response to our requests suggests that the scheme may not help that many home owners. We also welcomed the reform of income support for mortgage interest. However, the reform takes benefit back only to 1995 levels. Like bodies such as the Council of Mortgage Lenders and Shelter, we believe that the UK Government needs to be far more ambitious in its plans for helping home owners who are in difficulty. We are doing everything that we can; we urge the Prime Minister to do the same.
One thing that the UK Government is doing is following Scotland's lead. Back in September, it announced its mortgage rescue schemes, five years after the establishment of the Scottish mortgage to rent scheme. Today, I will announce the details of the next part of our package to help home owners who are in difficulty. Our home owners support fund will build on the existing mortgage to rent scheme and develop a new mortgage to shared equity scheme to help some owners to keep ownership of their homes but substantially reduce their debt.
Recently, the performance of the mortgage to rent scheme was independently evaluated. The evaluation found that the scheme had been successful in helping many families to avoid the pain of being forced out of their homes. It also made a number of recommendations for improvement. Before we could implement the new home owners support fund, we wanted to consider the results of the evaluation to ensure that any new scheme was carefully targeted to provide effective support for those who most require it, while also providing best value for the taxpayer. We believe that the new fund will achieve both of those aims.
The final report of the evaluation is published today on the Scottish Government website. The key recommendations are that the processing of applications should be speeded up, costs should be reduced and the scheme should be better targeted. Although we do not accept all of the specific recommendations—it is important to note that some are for the UK Government to implement—we are revising the mortgage to rent scheme in light of both the evaluation and our operational experience. The changes are designed to improve the effectiveness and efficiency of the scheme by increasing awareness of it with advice agencies, lenders and social landlords; accepting applications to the scheme at an earlier stage; targeting households at the lower end of the market to ensure that support is focused on those who are least likely to be able to trade down; encouraging more registered social landlords and local authorities to participate in the scheme; under normal circumstances, barring people with second homes from applying for assistance; and requiring social landlords to accept the results of the scheme 2 survey carried out by Government-appointed professionally qualified surveyors.
The evaluation also recommended the establishment of a mortgage to shared equity scheme, something that we had already announced in June. Following careful consideration of the best way to help Scottish home owners who are in financial difficulty, I am pleased to announce today how the new scheme will work. Home owners with at least 25 per cent equity in their property will be eligible for the scheme. The Scottish ministers will take an equity stake in the house, allowing the owner to reduce the level of secured debt and manage their monthly finances more easily. We will appoint an independent financial adviser to assess an applicant's financial situation and recommend the level of stake that the Scottish ministers should take. It will be for the applicant to decide if the offer is sufficient to manage their debt. The applicant will also need to seek their lender's agreement to the new arrangements. Applicants will need to meet certain criteria, including taking appropriate advice and showing that they have explored all options available to them, such as discussing alternative payment schedules with their lender.
I confirm that we are increasing the home owners support fund budget by £10 million, to £35 million over two years, to meet increasing demand. Information on the operational details of the new mortgage to shared equity scheme will be published on the Government's website today. Both that scheme and the new mortgage to rent scheme will be open for applications from 16 March.
The measures that I have outlined represent a comprehensive and robust package of support for home owners who are in financial difficulty, particularly given the constraints that are placed on us by the tight financial settlement and the limited devolved powers that we have been given. However, we will always look to see what more we can do. That is why, as the Minister for Community Safety announced on 13 January, we are establishing a sub-group of the debt action forum to examine the issue of repossessions. The sub-group will consider whether there is adequate legal protection for home owners in Scotland or whether such protection needs strengthening, and will also examine what else Government and others can do to help. I am particularly pleased that Adrian Stalker has agreed to chair the sub-group.
Fergus Ewing also announced a number of changes to the debt arrangement scheme, which is available free and helps people with a disposable income to pay back their debts over a longer period, free from the threat of legal action. In addition, analytical work is under way to support the policy needs of the debt action forum and the short-life working group on repossessions. Analytical reports on debt, insolvency and repossessions will be produced on a more routine basis to ensure that our policy measures minimise the effects of the economic downturn.
The year ahead is unlikely to bring a significant improvement in the current economic conditions, but the Scottish Government is working hard to minimise the impact of the credit crunch. I believe that the package of actions that has been announced today will provide vital support to Scottish home owners in these difficult times.
The minister will now take questions on the issues raised in his statement. I intend to allow about 20 minutes for such questions, after which we must move on to the next item of business. I cannot take time out of the next debate, as it is already oversubscribed.
I thank the minister for early sight of his statement. I agree with him totally that, in this time of global credit crunch and economic recession, we all seek to support those who are most affected.
I am disappointed, however, that the minister has been less than full in his praise for Westminster, which has in fact enacted a number of measures. The minister himself has been slow to act: £100 million of funding was much trumpeted in August, but only £18 million has been committed so far. Many of the measures announced today, particularly on repossessions, have been forced on the minister by my colleague Cathy Jamieson. In fact, the only new thing in the statement, apart from the detail of the mortgage to shared equity scheme, is the extra £10 million. However, I offer my party's support for both the mortgage to shared equity scheme and the mortgage to rent scheme—which the Labour-led Executive introduced.
How many people does the minister expect to benefit from the new mortgage to shared equity scheme and the amended mortgage to rent scheme? How much of the additional £10 million will be spent on administering the schemes, including the appointment of financial advisers? What discussions has the Scottish Government had with mortgage lenders about taking part in the mortgage to shared equity scheme?
I thank Mary Mulligan for her and her party's support at least for the general thrust of today's announcements. I cannot agree with her comments regarding the spending of the accelerated affordable housing investment programme money. On this year's advance money, of the £35 million—I am sorry, £40 million—£18 million has already been announced, and £5 million is going into the mortgage to rent scheme. The further £17 million will be announced next week. There has been much progress, and all that money will be spent to great effect across the country. It has been widely welcomed with respect to land purchases, off-the-shelf purchases and accelerated programmes.
Regarding the overall capital acceleration, I am sure that Mary Mulligan would not wish to mislead the Parliament on the relationship between what we are doing and what the UK Government is doing. We have accelerated about £120 million of money for housing. The UK Government has accelerated £500-plus million. Pro rata, the UK Government has done much less with regard to accelerated housing money than has the Scottish Government. We are far ahead of the game compared with the UK Government in that regard.
On the specific questions that Mary Mulligan asks, we expect about 600 people to be helped by the two schemes over the two years. The administration costs will be in line with the current costs, so there are no additional administration costs over and above what would be expected for running the schemes. Officials have, of course, had discussions with lenders and others. The Deputy First Minister met representatives of the CML during the past week or so to discuss a number of matters, including the mortgage to equity scheme.
I thank the minister for the advance copy of his statement. I welcome the news that a mortgage to shared equity scheme is to be introduced alongside the existing mortgage to rent scheme, and that the Scottish Government is keen to address many of the points that are contained in the evaluation report.
Can the minister set out more details on how he will improve the administration of the mortgage to rent scheme and cut down on processing delays? In the current circumstances, time is of the essence for hard-pressed families. Referring to those people who cannot be reached by the schemes, and who face homelessness, is the minister confident that, as the economic slowdown continues, local authorities will be able to deal adequately with the additional pressures that will come on top of the significant existing homelessness problems? We have long called for a review of homelessness policy in Scotland. Now, it is more crucial than ever. Will the minister review homelessness policy as a priority, in light of the current economic downturn?
On actions that we have taken to address points that were raised in the evaluation of the mortgage to rent scheme, we all want the process to be as quick as possible to ensure that people get the maximum amount of help as soon as possible.
On specific changes that we intend to make, we will train money advisers in order to speed up the process and cut down on unnecessary mistakes or delays. We will require social landlords to accept the results of the scheme's survey rather than implement a second survey, which should cut down on the time taken. We are removing the requirement to analyse the purpose of secondary loans, which will speed up the process, too. We are also offering properties to social landlords on a first-come, first-served basis rather than through the current rotational system. A number of specific measures will therefore be taken to speed up the process to ensure that people can get help as soon as possible.
On homelessness, the schemes are just one aspect of Government policy to try to help people to stay in their own homes. We have produced a range of policies and there is a range of support for people who are in debt, including the additional funds of £3 million for in-court advice and £1 million for face-to-face advice, as well as the extra money for the national debtline. Those measures and others, including the changes to levels of legal aid support, are helping people on the ground as we speak.
We of course keep homelessness policy under constant review to ensure that we do whatever we can. The Parliament is rightly proud of the progressive homelessness legislation that it has passed, and we want to ensure that we remain at the cutting edge of homelessness legislation. We want to ensure, too, that we minimise people's risk of becoming homeless. However, if people unfortunately do become homeless, we also want to ensure that the maximum amount of support is in place so that they do not spend time being homeless in Scotland.
I, too, am grateful for early sight of the minister's statement, although I find a little curious the announcement that the details of the new mortgage to shared equity scheme will be published on the Government website today. I am not entirely sure that that is within the spirit of providing good information to the Parliament. However, leaving that aside, it would be churlish not to acknowledge that many of the measures that the Government has put in place, whether announced in the statement or prior to it, are very much to be welcomed, given the difficult situation that home owners in Scotland face. I welcome in particular the implementation of section 11 of the Homelessness etc (Scotland) Act 2003 and the setting up of the group to review whether home owners in Scotland have adequate legal protection. We have not always agreed on that, but I am grateful that the matter is being given attention.
It is clear from the detailed report on the mortgage to rent scheme that, by and large, it has been given a clean bill of health. As the minister said, the report indicates that, with more information, substantially more people could benefit from the scheme. To that end, could the minister elaborate on his answer to Mary Mulligan? What does he anticipate? Critically, the most vulnerable people will be more likely to apply to the mortgage to rent scheme, so how will the minister ensure that it will be able to accommodate them? Having extended the money, how will he ensure that he can control the two separate schemes in a demand-led situation?
Ross Finnie is correct that the scheme is demand-led. I hope that members will welcome the fact that we have increased substantially—from £25 million to £35 million—the overall budget, because we recognise the increased pressure that the scheme will be subject to for the foreseeable future.
Over and above that, the schemes fit into a package of measures. It is not just about people getting into difficulty and going straight to the mortgage to rent scheme. We expect that a wide range of advice and support will be on offer in citizens advice bureaux and in other areas. If necessary, people will be able to apply to the mortgage to shared equity scheme, but before that they can apply to the UK home owner mortgage support scheme for a payment holiday. Of course, if people eventually have such levels of debt that they cannot sustain the mortgage to shared equity scheme, they will end up in the mortgage to rent option. That range of options represents a substantial package of support for people who are in financial difficulty.
At the end of the day, we all accept that no Government can support every single person in every set of circumstances. I see Ross Finnie nodding in acceptance of that premise. We need to ensure that people seek advice and speak to their lender as soon as possible. That advice should be available where and when it is needed, so that people do not get into the situation of being at the door of last resort. Our direction of travel aims to ensure that people get early interventions and early support, which is one reason why we have changed the mortgage to rent scheme so that people will no longer need to wait until they are subject to a court action for repossession before applying to the scheme. People will be able to apply once they are three months in arrears. Getting early support and early advice is the real answer.
We come to open questions. Time is limited, so there should be one question per member and one answer per question.
I welcome the measures announced in the statement, which will undoubtedly tackle home repossessions. What efforts has the Scottish Government made to ensure that people are secure in their homes and are not compromised by the UK Government's failure to act on the Office of Fair Trading's recommendations that the sale and rent back market be regulated? Minister, I am worried that, in effect, there might be a black market in repossessions.
Clearly, one reason why we have announced details of the mortgage to shared equity scheme and changes to the mortgage to rent scheme—as well as the other measures in the package—is to ensure that we have complete coverage. We want to ensure that there are no holes in the schemes that people can fall through.
We are on record as saying that we fully support the OFT's recommendations on the regulation of sale and rent back. The Deputy First Minister wrote to the UK Government to press it to take action on that. Like others in the chamber, I am disappointed that the UK Government has not taken action so far. At this difficult time, the idea that an unregulated area of financial services should be allowed to prey on the unfortunate victims of the difficulties of the credit crunch is disappointing. Yet again, I take this opportunity to press UK Government ministers to act rather than consult.
In "Evaluation of the National Mortgage to Rent Scheme", one of the findings states:
"Finding landlords for MTR cases is often a challenge, and for significant numbers of cases no landlord can be obtained … Some local authorities and small associations had or foresaw financial limitations on participation."
What specific actions will be taken to address that point? Widening the scheme might allow more people to participate in it, but if landlords do not take part, people will not be able to take up the opportunity.
Clearly, the additional funds that I announced both in December and today will help to support a number of landlords to participate in the scheme. We cannot and should not force individual registered social landlords or councils to take part in a scheme if they do not wish to do so. However, generally speaking, I think that the scheme is well received and well respected across the country. The changes to the mortgage to rent scheme and the introduction of the mortgage to shared equity scheme that I have announced today will be welcomed by those who wish to participate. I encourage all RSLs and councils that can do so to participate in the scheme.
The member is correct to imply that support for the scheme is not spread evenly across the country. I will certainly press all RSLs to participate to ensure that we get even support across the country. One advantage that we have in Scotland is that we have a national scheme with a central administration, which makes things much easier for those who are involved. That is one finding that has emerged from the evaluation. I am sure that all members, in their ordinary business of supporting people across the country, will be keen to point to both schemes as support that ordinary constituents can access.
Can the minister explain how the mortgage to shared equity scheme fits in with the Government's overall housing strategy? Given that an applicant's lender will have final say on whether ministers can take a share in their property, has the Council of Mortgage Lenders indicated whether its members are prepared to engage in the scheme to make it effective?
Ultimately, it is up to individual lenders whether they wish to participate, but both the CML and individual lenders have indicated that they will participate in the scheme. I cannot speak for all lenders or comment on how wide and varied their participation will be, but, given the communication that has taken place, our expectation is that, for the most part, lenders are willing to participate. Of course, the lender gets a great advantage from the scheme, in that money continues to be paid and there is a security in relation to the financing of the mortgage that they supplied. It is not in their interests to deny people access to the scheme, because it costs them money to repossess properties and remove people from them, after which they have to sell the property to try to recoup some of the money that they are owed. It is in the interests of mortgage lenders and others to participate in the scheme.
Given that one of the weaknesses of the current mortgage to rent scheme is the requirement for legal action to be imminent, will the minister tell us when people will be able to apply to each of the schemes, and also what the maximum value of the house can be for someone to be eligible for the schemes?
The same time period will apply to applications for the two schemes. People will be able to apply for entry if they are more than three months in arrears. I agree with the member that it is a weakness of the current scheme that people have to wait until the last minute before they can apply.
I apologise, but I have forgotten the second part of the question.
It was about the maximum value of the house.
I cannot recall. I am not sure that there is a maximum value, but I will write to the member with the detail on that.
There should not have been a second question anyway, minister.
The minister confirmed that he is increasing the home owners support fund budget by £10 million to £35 million over the next two years. The starting sum of £25 million will rise by £5 million in one year and by a further £5 million the following year. Those figures could be shown clearly on a graph. Given the cases that are coming to all members as people get into increasingly desperate straits, how does the minister know that those increases will match the demand from the great wave of people who are in severe trouble and are coming our way?
We have the Council of Mortgage Lenders estimate of the number of people throughout the UK who are likely to be involved in repossession, and we also have the operational experience of the mortgage to rent team. However, the member raises an interesting point. It is difficult for us to estimate the number of people involved. We will keep the level of Government support for the scheme under review, but I would welcome the member's support, and others' support, for our attempts to obtain separate Scottish data on repossessions. Because we do not have such data at present, we act on estimates and guesswork. Frankly, that is not good enough when we are trying to provide support for people throughout the country. I hope that the member will support our case for the production of separate Scottish data on repossessions so that we have exact data to work on and can accurately predict the trends that he wishes us to analyse.
The minister said that applicants to the mortgage to shared equity scheme should take appropriate advice. What advice services will be made available to people who hope to take advantage of the new scheme and how will they be able to access them?
Please be as brief as possible, minister.
The awareness-raising campaign that we intend to run will highlight the range of options for people who are facing money difficulties. We are also liaising with lenders, advice agencies and other relevant stakeholders to ensure that home owners who are in financial difficulties are made aware of both the mortgage to rent scheme and the mortgage to shared equity scheme. In addition, there will be a website and a telephone helpline for the two schemes.