Mortgage companies have criticised the goverment for failing to back the disappointing Mortgage Rescue Scheme, which has helped just 629 households since its launch in April 2009.

Last week housing minister Grant Shapps cut the amount home owners can sell to local authorities under the scheme from 65% to 55%.

The pot of money used for the scheme will remain the same until the goverment's comprehensive spending review in October.

But Shapps says the scheme should be refocused to offer better value and claims its £180m funding may be allowed to run out this year.

The scheme lets consumers sellpart of their property to a council or housing association and stay in it as a tenant. The scheme has helped just 629 home owners since 2009, but around 1,849 applications were being processedd at the end of March.

Paul Abbott, head of property and mortgages at Advance Financial Services, says the cut in the amount that owners can sell is a blow.

But he adds: "There is a lack of public awareness about this scheme and take-up has been poor."

Eric Stoclet, managing director of Crown Mortgage Management, says the scheme has prevented borrowers in arrears from losing their homes and provided an alternative for those who cannot sustain a mortgage.

He says: "With large-scale redundancies anticipated more households are likely to feel the financial strain and more home owners will struggle with mortgage payments.

"At this pivotal stage, it is crucial that the goverment maintains the scheme when it carries out its forthcoming spending review."

But Pete Thomson, managing director of Residential Property Solutions, says: "The scheme has been a dismal failure and has fallen well short of its targets. This type of goverment support has made a little difference while lender forbearance has simply delayed rather than cured the problem of repossession for many households."