The UK government has launched a new mortgage rescue scheme.

The UK government has extended its £200 million mortgage rescue scheme across the whole of England.

The scheme is designed to help “vulnerable families” at risk of repossession to stay in their homes, and is one of a range of measures being put in place to help ensure repossession is always a last resort.

It was devised last year by the National Housing Federation, which represents England’s housing associations, and the Council of Mortgage Lenders.

Targeted at those households on incomes of less than £60,000 a year, those entitled will be re-housed under homelessness legislation – largely the elderly, disabled or those with children.

The scheme, which saw an early introduction by 80 councils in December 2008, is expected to help up to 6,000 household avoid repossession over the coming two years.

Households will be able to apply to their local authority for two options to help them remain in their homes, depending on their circumstances.

They will either be able to sell a share of their home to a housing association, enabling their monthly mortgage payments to be significantly reduced, or they can sell the entire home to a housing association and remain in the property as tenants paying a subsidised rent.

The government has taken further action to support homeowners. The time before homeowners who lose their jobs receive financial help with the interest payments on their mortgage – Income Support for Mortgage Interest (ISMI) – has been cut by two thirds from 39 to 13 weeks.

The Homeowner Mortgage Support Scheme, which will allow households who suffer an income shock to defer part of their payments for up to two years, is also being urgently developed with lenders.

Margaret Beckett, the Housing Minister, said: “We know that some families are worried about their mortgage payments right now, and we are determined to do everything possible to ensure repossession is always a last resort. 

“As well as expanding free debt and legal advice, we have increased the support available for people who lose their jobs, and are introducing the option for homeowners to defer part of the loan to give them the time they need to get back on their feet. 

“Whatever the situation, the clear message for households struggling with their payments is to speak to their lender as soon as possible.”