Support for Mortgage Interest - 50% cut

[Snorkerz]

I have been advised by my local Jobcentre that the DWP are planning on cutting the rate they use to calculate mortgage help from 6% to 3%. This will mean that mortgage payments will drop by 50%!!!

 

It has not been confirmed yet, but has obviously been communicated to local offices.

 

Urgent letters to MPs methinks, here is mine..

 

It has come to my attention that the DWP are contemplating reducing the rate of interest they use when calculating Support for Mortgage Interest from 6% to 3%. I implore you to resist such a move.

 

There are very few mortgages offering a rate of 3% - and people who qualify for SMI are rarely the ones who have the financial security to obtain such a rate. SMI claimants are almost entirely "sub-prime", and as such can only obtain higher mortgage rates - 6% is probably conservative.

 

It seems ironic that those who have been financially prudent in the past in order to secure a home for their family are being penalised to such a degree.

 

Be reckless and the council will pay all your rent with LHA of up to £95 per week (say £85 from next April). Be prudent and we will cut your SMI from a paltry £40 a week to an insulting £20 a week. It stands to reason that the reduction in SMI will cause more properties to be repossessed, and then all those homeless people can claim their £85 per week LHA instead. That's a real saving for the government - a proposal intended to halve costs actually doubles them.

 

Then there are the hidden costs of repossessing a property - the inability of the court system infrastructure to handle a huge influx of such cases, there is the increased strain on the health service, particularly GPs and Mental Health Teams paying for anti-depressants and counselling services, not to mention the additional workload on charities and volunteer groups in both the housing and health sectors.

 

I understand the need for the government to save and generate more money, and maybe a small decrease can be accepted, but if this increase is implemented it makes a mockery of the previous Prime Ministers solicitation to be prudent, or the current incumbents claims that the poorer sections of society would be protected from the worst effects of the current round of economies.

 

Once again, I urge you to liaise with your colleagues at DWP to prevent this abhorrent proposal coming into effect.

 

If you cut and paste this, ensure you change the LHA rates to the correct amount https://lha-direct.voa.gov.uk/Secure/LHARateSearch.aspx?SearchType=LA and insert your own figures. The 2011 LHA rates will differ from region to region - but my guess is a 10% average reduction.

[sj01]

Hi, There have been a few questions on here about mortgages and interest but they never seem to get answered.

I have had a little trouble getting my interest paid and have been told that my childrens wages are going to be taken into account, I cant really ask the kids to pay my mortgge, they have car loans and credit card bills, travelling expenses. They pay me keep but I cant put it up - they couldnt afford it. Perhaps the government want to make us homless. Like you say, a rented house would cost a lot more than my mortgage.

[andydd]

I find this a bit hard to believe, after all, how many people actually have a interest rate as low as 3% ?. I can see some logic in reducing the current rate, perhaps to something index linked or an average rate (which no doubt would be higher than 3% ?).

 

Surely all this would do is make a lot more people fall into arrears and lose their homes, and then no doubt cost the government more to rehouse.

 

I currently get mortgage interest paid of approx. £220, if i were to lose my home, it would cost a lot more in rent to rehouse me.

 

Andy

[GRUMPYOLEMAN]

I find this a bit hard to believe, after all, how many people actually have a interest rate as low as 3% ?. I can see some logic in reducing the current rate, perhaps to something index linked or an average rate (which no doubt would be higher than 3% ?).

 

Surely all this would do is make a lot more people fall into arrears and lose their homes, and then no doubt cost the government more to rehouse.

 

I currently get mortgage interest paid of approx. £220, if i were to lose my home, it would cost a lot more in rent to rehouse me.

 

Andy

 

Other than to go back to the old system of calculating the amount of SMI based on the 'actual' amount being charged, I cannot see a way that everybody will be kept happy.

They brought the 'fixed' system in to avoid all of the changes that went on. A fixed rate was cheaper and easier to implement.

 

As you say, those that are on a rate of say 7% are going to lose out, whilst those on 3% and below will still win. Yes there are many out there on current rates of up to 3%!

 

There is also a point here and I must agree with it; those that are on mortgages of up to 6% in the past have been paid 6%. Those with mortgages of say 4%, have been having 6% paid, meaning some capital has also been repaid.

 

What should happen is that the government must take a charge on the property for the amount of interest paid, which is then repaid when the house is sold. Otherwise you could have homeowners that have say £50,000 of equity wrapped up in the property being protected for the homeowner, because the government is paying the ongoing interest charges. That's not right. If there is equity, it should be treated as notional capital and used notionally to keep up with the mortgage interest payments. In that example there is upwards of enough equity to cover something like 5 years of interest payments until the equity is used up.

 

If there is no equity, then they are the ones that should have the help with the full interest being paid in order, as you say, to avoid repossession.

Edited September 3, 2010 by GRUMPYOLEMAN