DWP mortgage cuts could mean rise in reposessions

chewmylegoff

drc wrote: »

So, people have been getting 6.08% even if the interest on their mortgages is a lot lower. What happens to the excess they get, are they allowed to keep it and is it counted as a benefit?

the SMI is paid directly to the lender and so is deducted from the outstanding mortgage balance. if the SMI is more than the monthly interest added to the balance, then the balance will reduce. they don't have to pay it back.

ILW

So the taxpayer has been buying houses for people.

FTBFun

nearlynew wrote: »

If people can't keep up the payments on a mortgage, it is right that they should be repossessed.

The government has no right to interfere and use taxpayers' money to prevent it happening.

On what basis does it have no right?

nearlynew

FTBFun wrote: »

On what basis does it have no right?

It has no right to interfere in any market. Individuals should have a right to trade freely and take the rough with the smooth.

And it's not their money. It's ours. And I don't remember being asked how it should be spent.

olly300

drc wrote: »

So, people have been getting 6.08% even if the interest on their mortgages is a lot lower. What happens to the excess they get, are they allowed to keep it and is it counted as a benefit? Seems like this has been an easy way for a lot of people to up their unearned income and continue claming other benefits. The taxpayer should not have been funding this. I thought it was a prerequisite that people get mortgage insurance when they get a mortgage in the event that they cannot pay for whatever reason?

The money goes straight to the lender. The claimant never gets their hands on it.

It will be credited against the claimant's mortgage account but considering they are likely to be in arrears anyway before they started getting their interest paid the net overpayment is negligible.

The government, regardless of political persuasion, only looks at how much they are paying in mortgage interest when there is high unemployment after a recession. They normally don't care otherwise.

olly300

nearlynew wrote: »

It has no right to interfere in any market. Individuals should have a right to trade freely and take the rough with the smooth.

And it's not their money. It's ours. And I don't remember being asked how it should be spent.

Didn't you vote in the General Election? If you voted then you elected someone to take those decisions on your behalf.

chewmylegoff

nearlynew wrote: »

It has no right to interfere in any market. Individuals should have a right to trade freely and take the rough with the smooth.

And it's not their money. It's ours. And I don't remember being asked how it should be spent.

the government has to house people who can't house themselves, therefore it would seem prudent for it to "interfere" as you put it, in this market in this way. if they're not being paid this benefit, they'll just get LHA instead. further, some of the banks are currently part or majority state owned.

say someone is paying a mortgage to RBS. they get made redundant.

what is the best deal for the taxpayer:

(i) pay their mortgage interest until they find another job

(ii) have RBS repossess the house and sell it at a loss, write off the balance of the loan. government pays LHA to the repossessed person for the rest of all time.

clearly (ii) is not a net win for the taxpayer.

it won't be the cheapest option in all circumstances but there must be times when it is and therefore it has a place, at least in theory.

whether, in practice, it is actually providing value for money for taxpayers, i have no idea.

MissMoneypenny

chewmylegoff wrote: »

SMI only covers the interest on mortgages not the capital repayments, therefore it is not the case that people are having houses bought for them. people are having the interest on loans paid for them. in practice there will be some people who receive more SMI than they actually pay mortgage interest, so they will technically be paying off capital with the SMI,

Even if they only get the interest paid, they still get a house bought for them if they are on long term benefits and get their mortgage interest paid. They can do this by trading down at the end of their mortgage term. Explained best here:-

mitchaa wrote: »

If I take out a £150k mortgage today, it is likely I'll pay £300k back with interest. In 25yrs time the house may have trebled in value so I have made a profit of £150k in growth over 25yrs.

If you take out a £150k mortgage today and become disabled tomorrow. You pay £150k back and at the end of the 25yr term you have made a profit of £300k in growth over 25yrs.

With the 6.08% payments over the last few years and the low interest rates that the majority of people will have been put onto, aswell as getting the interest portion paid off in full, a portion or perhaps all of the repayment part was getting paid off aswell. So you may only pay £75k out of your own pocket, compared to the £300k I have to pay to have the same £450k house at the end of it in 25yrs time.

I stil think the government should put a charge on the houses of those on long term SMI, so that any house price increases go back into the government pot.

Graham_Devon

I don't think anyones got a problem with the government helping people out.

What people do seem to have a problem with is being told it only pays for the interest part. That is, unless it pays for the capital part too. What people mind is houses being effectively bought for people, while other people are priced out paying high rent with no help because they simply do not count.

SMI for 12 months or so would be good. After that, the government should be looking at a variety of other routes, such as buying out the mortgage owner and taking over the asset at a decent price. The tennants can stay there, paying rent and so on.

I'm sure there are problems with this, but there is with anything. It would certainly be fairer than having 2 families, one paying high rents locked out of the mortgage market due to high prices and tight credit and therefore can't afford to buy, and their next door neighbour family ALSO not being able to afford to buy, but the government helping them out and in some cases, paying off their mortgage for them, leavign them with a very expensive asset they can then sell.

The reduction in interest payments will help pay only the interest and not the capital. But it still has loads of problems attached, and I don't really see it as fair. Everyone signs up to a mortgage knowing the risks. Or at least, they should do. Don't see why current homeowners (and I am one) should be seen as more important than non current home owners.

People should simply be treated equally and fairly. I think SMI for 12 months is fair.

olly300

MissMoneypenny wrote: »

Even if they only get the interest paid, they still get a house bought for them if they are on long term benefits and get their mortgage interest paid. They can do this by trading down at the end of their mortgage term. Expained best here:-

You are presuming that things are black and white.

Not everyone on SMI lives in a large house therefore downgrading would mean moving to a completely different area. if they are sick this means the care burden would pass from their families to the tax payer.