A new £40m scheme has been announced to help struggling Welsh homeowners with their mortgages. Under the scheme, those who cannot afford the increased rates, due to bigger interest rates on some types of mortgages, may be eligible for interest-free loans for the first five years. The loans will also be repayment-free for five years and will have to be repaid within 15 years. The Welsh government said the initiative is aimed at reducing homelessness.
The Help To Stay loans will be open to people in homes worth up to £300,000 and with household earnings of no more than £67,000. Eligible applicants may borrow up to £147,000 to pay off some of their mortgage and lower their monthly payments. They will need to provide evidence of their difficulties and speak to an independent debt adviser before receiving the loan. Recipients could be forced to sell their homes if they fail to repay the loan.
Despite concerns about the Welsh government’s budget, ministers have allocated £40m over the next two years for the Help To Stay scheme, which forms part of Welsh Labour ministers’ co-operation with Plaid Cymru. The loan will be charged at 2% above the Bank of England rate after the five-year interest-free period. The scheme could help up to 400-500 households a year, according to the Welsh government.
Climate Change Minister Julie James said it makes more sense to spend money on the loans “than let people fall into homelessness.” Borrowers will receive free debt and financial advice in order to get into a better financial situation by the end of the first five years, when repayments begin. The loans aim to help those who have missed repayments or think they may be about to, and will have to be paid back within 15 years.
According to UK Finance, between April and June 2023, there were 81,900 homeowner mortgages in arrears of 2.5% or more, a 7% increase from January to March. However, it is thought that the total level of arrears remains very low by historic standards
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