My Home Finance is an innovative partnership led by the Federation and supported by the Department for Work and Pensions, the Royal Bank of Scotland, 26 housing associations and Wates Giving and will offer access to affordable credit, at lower rates of interest than those usually charged to people who are financially excluded.
My Home Finance – which will be one of the largest ever not-for-profit financial services providers in England – plans to open 10 branches across the West Midlands by the end of October.
After a face-to-face interview, eligible customers will be able to borrow relatively modest sums of around £500, repayable weekly. My Home Finance envisages this will help customers to buy everyday items such as school uniforms, a new washing machine, or furniture for their home.
The starting APR of a My Home Finance loan will be 29.9%, contrasting sharply with 200-2,000% APR, the typical range of interest rates charged by doorstep lenders and loan sharks. It is envisaged that by borrowing at less expensive rates customers will be able to pay off debts or have more money left over to spend in their local community.
My Home Finance will also offer debt advice and help to open a bank account to encourage customers to build up their savings – with the ultimate goal of helping people to take control of their own finances.
There is a pressing need for schemes like My Home Finance. Currently, around 2.5 million borrow from doorstep lenders at rates often in the region of 272% for new customers. A further 200,000 are estimated to borrow from loan sharks. A majority of those financially excluded are social housing tenants.
The branches are part of an innovative pilot – and if they demonstrate that a national savings and loan scheme is viable, My Home Finance will open branches across England and write up to 150,000 loans to people on lower incomes over the next 10 years.
The pilot, created by the National Housing Federation, will begin in the West Midlands. The West Midlands has unemployment levels among the highest in the UK and is in particular need of affordable credit, access to bank accounts and money advice.
The branches will be located in busy high streets and shopping centres in eight local authority areas across the West Midlands, be run by East Lancashire Moneyline, one of the leading lenders of affordable credit in the UK, and create employment for around 40 people.
Branches have already opened in Hereford, Worcester, Walsall and Northfield, south Birmingham. By the end of October, further branches will have opened in Coventry, Tamworth, Dudley and Wolverhampton, and in Birmingham city centre and Erdington, in north Birmingham.
Federation chief executive David Orr said: ‘My Home Finance will provide an affordable, convenient and trusted option for people on lower incomes looking to build up their savings and borrow modest sums.
‘By offering fair loans at fair prices, we hope to offer an alternative to both loan sharks, who cynically prey on hard up families, and doorstep lenders, who are all too willing to lend cash to the desperate at hugely inflated rates of interest.
‘This ambitious not-for-profit sustainable scheme shows the determination of the housing association sector, the Government and RBS, to help financially excluded consumers join the financial mainstream by saving and borrowing in a fair and responsible manner.’
Secretary of State for Work and Pensions Iain Duncan Smith said: ‘It is great to see new ideas coming through to help the poorest in our society access credit and advice on how to avoid unsustainable levels of debt.
‘As a Government, we are fully committed to helping people make responsible choices for themselves and their families and that includes making the right choices when it comes to personal finance.’
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