People will be able to claim thousands of pounds towards their mortgage payments through a Welsh Government scheme to help people struggling during the cost of living crisis. Those who qualify will get a loan which is interest free for five years.
The scheme, which opens for applications today, will be available to households with a maximum of income of £67,000 and a property valued at £300,000 or less. Help to Stay Wales will be administered by Development Bank of Wales on behalf of the Welsh Government. It will work alongside support offered by mortgage providers through the UK Mortgage Charter for customers who are struggling to afford their mortgage payments.
The £40m plan has been developed to deal with the current cost of living crisis. There have been 12 consecutive interest rate hikes in 18 months, and the Resolution Foundation says the annual repayments for people re-mortgaging next year are set to rise by £2,900 on average, with repossession claims rising by 15% between April to June 2023.
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Modelling by officials shows that if all the £40m is spent over the current and next financial year, it could see 400 to 450 households benefit, based on a £50-60,000 loan. Officials say there are no similar schemes of this type elsewhere.
People can apply from today [November 7] with an expectation of first payments being able to be paid in around six weeks, if all the correct information is provided on time and pending legal processes.
The Welsh Government say it is an option for vulnerable homeowners in Wales struggling to afford their mortgage payments and facing the threat of repossession and homelessness. They say it will help more people at an earlier stage, not just those that are threatened with repossession.
Homeowners who meet various criteria will be offered a Help to Stay equity loan which is used to part-pay down their existing mortgage (and arrears), thereby reducing their ongoing monthly mortgage payments to an amount they can comfortably afford.
It is secured via a second charge, agreed by their mortgage lender. The 15-year loan is interest and repayment free for the first five years, with interest charged at 2% plus the Bank of England interest rate. It is to be repaid monthly from the start of year six. There are no repayment obligations during the 15-year term, although repayments can be made at any time without penalty.
On a £300,000 house, the maximum value permitted in the scheme, the most that could be claimed is £147,000. For the latest politics news in Wales sign up to our newsletter here.
Example
Mr and Mrs Singh own their home in Carmarthen currently worth £135k, against which they have an outstanding mortgage of £123,000 over a six year remaining repayment term. Their 4.25% fixed rate recently ended and moved to a standard variable rate of 7.65%. This change saw their monthly repayments increase from £923 to £2,129. After cutting all non-essential costs, their monthly household income of £2,667 only allows a maximum of £1,200 per month towards mortgage payments.
This deficit has led to an accumulation of £4,258 in arrears with their mortgage provider. Due to their high loan to value at 91% and/or other eligibility reasons their mortgage provider is unable to switch them to a different mortgage product on more favourable terms. Their mortgage provider has agreed to a six month repayment holiday but, as they have no means of meeting the higher repayments when that holiday period comes to an end, they are ultimately facing the risk of repossession and homelessness.
If their mortgage provider is willing to consent to a second charge, Help to Stay Wales could offer Mr and Mrs Singh an equity loan of circa £57,758 to clear their current arrears and reduce the mortgage balance down to a level that would see monthly repayments fall within the £1,200 they can afford. The HTS equity loan would equate to 43% of the property value.
Provided by the Welsh Government
How it works
Applications open today (November 7).
If you are facing financial difficulties and meet the criteria for the scheme, you can apply to the scheme and share a copy of your debt recommendation plan and income assessment. If the application is accepted, your property is valued. The applicant chooses a mortgage advisor from the panel to provide independent, free advice about if the scheme is right for them.
A conveyancer has to be instructed, also paid for through the scheme, to complete the scheme. They will get consent from the lender for the loan to be secured on your property. The conveyancer completes all legal requirements needed.
The loan is secured against the property as a second charge. No payments are due for the first five years. In year five a direct debit is set up and the loan comes to an end in the 15th year.
The criteria:
- Property is in Wales and is the applicant’s primary/sole residence
- Applicant is either in or facing mortgage difficulty e.g. in arrears, missed payments, pending interest rate increase, change in personal circumstances
- Applicant has engaged with their first charge lender to discuss their situation
- Applicant has sought debt advice
- Property is clear of any legal actions
- Property is subject to only one existing legal charge
- £300,000 maximum property value
- £67,000 maximum household income
- Max 49% loan to value equity intervention
- Max 100% combined loan to value
- Outstanding mortgage must be on a capital and Interest repayment basis (or move to one as part of Help to Stay Wales intervention)
