Meeting of the Parliament 23 November 2022
This past month, Parliament used its powers to support renters who are struggling with the cost of living by freezing rents and banning evictions, which provides a lifeline to thousands of families this winter. Because it is our job to prevent a tidal wave of repossessions, homelessness and financial misery, we are calling on the Government to revamp its mortgage to shared equity scheme, thus supporting homeowners with mortgages.
Thirty per cent of all Scots—half of homeowners—still have a mortgage. Prices for energy, food and fuel have gone through the roof for them, as they have for everyone else. Now, homeowners face a Tory premium on interest rates too. The Scottish Government should not need convincing that more help is needed to keep people in their homes. To its credit, it has kept open its mortgage to shared equity scheme, which could help.
Evidence from Citizens Advice Scotland—which the Government cited in support of the Cost of Living (Tenant Protection) (Scotland) Act 2022—shows that, by last June, views of its “What to do if you can’t pay your mortgage” web page had increased by more than 1,600 per cent in a single year.
It is not just people looking for advice when fixed-rate deals end. For the estimated 200,000 Scottish homeowners on variable rate mortgages, this will have been a terrible year so far, and that pain is not over. Just last week, the Office for Budget Responsibility forecasted that effective rates on existing mortgages would rise to 4.3 per cent by summer 2023.
Shelter Scotland and Crisis put the cost of rehoming a household at around £50,000, with escalating costs for those households with greater support needs. However, the cost to families’ livelihoods, their wellbeing and mental health, and the impact on children of losing their homes are far greater.
The mortgage to shared equity scheme is a scheme of last resort. It is the final option for a family that is at risk of losing their home, after all other options have been exhausted. The family can reduce their monthly costs by asking the Government to take a stake in their home, which can be bought back when their finances allow.
However, the scheme is not delivering—it does not serve home owners in today’s market. There has not been a successful application to the scheme since 2016, and property thresholds have not been updated since 2017. Applications to the sister mortgage to rent scheme took at least a year to process in the past financial year, with only 41 per cent being successful. All the while, ministers have renewed budgets of millions that have gone unspent for years. It seems to be a slush fund that is to be raided for wider budget pressures each year.
The cabinet secretary’s amendment notes that the scheme is demand led, which is absolutely true. However, the scheme itself seems to design out demand. We propose that the mortgage to shared equity scheme be overhauled to deliver a true safety net for those who are at risk.