UK gov’t gives $292 mln to limit home repossessions

Bloomberg

The money will be handed to housing associations, which will have the power to buy stakes in primary residences and then rent them back, the Department of Communities and Local Government said. Only people earning less than 60,000 pounds a year are eligible for help.

Direct support
The program gives direct support to households after Brown made 21.3 billion pounds available to small and medium-sized companies last week. Repossessions will almost double to 75,000 this year as property prices fall and banks rein in lending, the Council of Mortgage Lenders estimates.

"We are determined to do everything possible to ensure that repossession is always a last resort," Housing Minister Margaret Beckett said in the statement. "For the most vulnerable households, the mortgage rescue scheme will be available to ensure they can stay in their homes."

The program will only cover property in England, since Scotland, Wales and Northern Ireland each have their own authorities to manage housing.

Homeowners must also have an outstanding mortgage of less than 400,000 pounds and savings of less than 16,000 pounds to qualify for the program. The opposition Conservatives said the government’s plan is too complicated.

"Ministers are guilty of running around like headless chickens announcing complicated, confusing and often contradictory plans, which later turn out to help far fewer people than the headlines would have you believe," Conservative lawmaker Grant Shapps said.

Commercial lenders are rationing credit and refusing to pass on Bank of England interest rate reductions as the recession drives up the unemployment and bad debts. The central bank lowered its key rate to 1.5 percent this month, the least since it was founded in 1694.

Drop in approvals
U.K. banks and building societies approved the fewest new mortgages since at least 1999 in November, and lenders are telling the central bank they will restrict lending further to companies and consumers.

For Brown, reviving growth and easing the pain of the downturn is key to his political fortunes ahead of a general election that must be held within 18 months. Brown, whose popularity has slipped in the two polls published so far this year, has repeatedly contrasted himself with the opposition Conservatives, who want to trim government spending.