Repossesions threat as Government reduces home owner support - Telegraph

drc

From the Telegraph (and read some of the interesting comments posted about the article)

http://www.telegraph.co.uk/finance/personalfinance/7940720/Repossession-threat-as-Government-reduces-home-owner-support.html#dsq-content

Repossession threat as Government reduces home owner support

More families will lose their homes, charities warn, as the Government prepares to reduce the amount of financial support it provides to borrowers by as much as £200 a month.

By Myra Butterworth, Personal Finance Correspondent
Published: 12:04PM BST 12 Aug 2010
50 Comments


Repossession threat


The latest repossession statistics showed numbers dropping after the Government introduced several measures for home owners who lost their jobs amid the economic downturn.

But some of this support is now being reduced. It includes Support for Mortgage Interest, which is paid to those on income-related benefits – such as Job Seeker’s Allowance – at a rate of 6.08 per cent.


The rate is paid regardless of how much a borrower actually pays to their lender – so it could mean that a home owner potentially ends up with a surplus of Government cash after paying out a lower mortgage rate to their bank.

This has prompted the Government to announce that it is cutting the rate to just 3.75 per cent from October 1. The new rate is based on the average mortgage rate provided by the Bank of England.

But charities warned the new rate will be too low for many home owners who will be left with a significant shortfall if they are still paying a higher mortgage rate.

The 2.33 per cent cut in Support for Mortgage Interest Support equates to as much as £202 less a month or £2,424 less a year on a typical £150,000 mortgage.

Debt charity the Consumer Credit Counselling Service said the decline would “aggravate” the level of repossessions.

Malcolm Hurlston, chairman of CCCS, said: “The cut in Support for Mortgage Interest will make it harder, and in some cases impossible, for many people to stay in their homes.”

It comes after Shelter warned earlier this year that more than five million home owners will be unable to afford a rise in interest rates and will be in danger of being evicted from their homes.

While repossessions are lower than originally feared, home owners with tracker mortgages will see their monthly repayments rise if interest rates go up. Many borrowers who have come to the end of their original deal have already seen their costs increase.

Repossessions fell to 9,400 in the three months between April and June, down from 9,800 in the previous three months and 11,800 during the same period a year earlier, according to the Council of Mortgage Lenders.

The CML has revised its forecast for the number of repossessions this year from 53,000 to 39,000.

Separate research by mortgage brokers Coreco and Mortgage Advice Bureau suggests the average deposit has shrunk from 32.5 per cent of the value of a property in June to 29 per cent last month.
A spokesman for the Department for Work and Pensions said: “We’re changing the rate at which we pay Support for Mortgage Interest because currently over 90 per cent of people are getting more than they actually pay out in mortgage interest each month – this is unfair to the taxpayer and not a good use of public funds.
"Using the Bank of England rate will ensure that people still get the help they need with their mortgage interest payments.”

treliac

So there will be a load more people looking to be rehoused into private or social housing.

Who'll buy the repossessed properties at the prices they'll inevitably plummet to? A new breed of buy to letters.... who can then let them back to the dispossessed?

drc

Some very angry comments at the bottom of the article. This one for example;

stephenmarchant
Today 01:17 PM
Recommended by
54 people

"Absolutely outrageous and utter incompetence in managing taxpayer monies. So someone who has been prudent and has some savings does not qualify for income related benefit and receives no handout for their £150000 mortgage - the irresponsible person receives £9000 per anum. Furthermore, if they have a tracker mortgage pegged to BoE artificially low rate of 0.5% they get to pocket over £8000 per anum tax free whilst still receiving their full benefits, free council tax etc. etc.

No wonder we are a nation of shirkers rather than workers!"

I think he has a point.

Damaged

and yet overall repossessions are reducing, thus the need for support is not longer need

http://www.thisislondon.co.uk/money/article-23866163-hopes-high-that-home-repossessions-will-continue-fall.do

Graham_Devon

Damaged wrote: »

and yet overall repossessions are reducing, thus the need for support is not longer need

http://www.thisislondon.co.uk/money/article-23866163-hopes-high-that-home-repossessions-will-continue-fall.do

They are reducing mainly because of the support, the pressure not to repo, and also, the banks themselves, waiting for prices to rise before they do repo.

Damaged

Graham_Devon wrote: »

They are reducing mainly because of the support, the pressure not to repo, and also, the banks themselves, waiting for prices to rise before they do repo.

Are they though? £200 odd a month is hardly a large sum.

If it is as a result of the help then the scheme has worked, so all good!

1984ReturnsForReal_2

There may be trouble ahead......

Damaged

drc wrote: »

Some very angry comments at the bottom of the article. This one for example;

I think he has a point.

He's raving and I am not sure where is getting his figures from.

At the end of the day, people who need this support can not all be lumped into the group of scroungers, some or all of them may have lost their jobs, got sick, or had issues.

Graham_Devon

Damaged wrote: »

Are they though? £200 odd a month is hardly a large sum.

If it is as a result of the help then the scheme has worked, so all good!

Depends on how you define works.

If the taxpayer is simply shelling out money, given to people who have no hope of keeping their house, and will ultimately get repo'd, it's a complete waste of money.

If it's helped people for a couple of months, fine. But thats not what the figures show. Some people are in thousands of pounds worth of arrears.

wymondham

I don't agree with any Government assistance unless the homeowner pays back that money when they come to sell (or after X years etc) - the tax payer should never fund someones private (often appreciating) asset.

chucky

1984ReturnsForReal wrote: »

There may be trouble ahead......

unfortunately people can't be on this kind of supports for ever - decisions have to be made.
a few months is fine - longer term i'm not convinced.

banks have been cleverer this time around - it's probably cheaper for owners to be in their property and it not being repossessed than the bank selling it at a loss as a repo.

there will be an impact if it is removed - it will be interesting to see to what level