MSE News: Support for mortgage interest benefit cut by thousands

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"230,000 struggling householders will see state handouts dive by a typical £3,700 a year from October ..."

Read the full story:
Support for mortgage interest benefit cut by thousands

michaels

Can anyone explain why the benefits can not pay the actual interest bill rather than a one size fits all rate, please?

fatbelly

I can see a logic in moving from 6.08% to 3.63% but...

This is payable on the eligible part of loans only, so where people have remortgaged, generally only the amount borrowed originally to buy the house qualifies.

The unfortunate consequence is that many people who were getting their contractual payment covered at 6.08% will not have it covered at 3.63% (so a £608 payment reduces to £363 per month) and have to make up the difference from their JSA/ESA/IS/Pension Credit. As a single person's JSA is £65.45 per week that might be difficult!

It would be nice to think that the problematic Mortgage Rescue Scheme would be sorted out to compensate for this. Don't hold your breath.

Peelerfart

michaels wrote: »

Can anyone explain why the benefits can not pay the actual interest bill rather than a one size fits all rate, please?

It's so that some people can get the taxpayer to overpay their mortgage for them and then whinge whenthey can't get "their" money back.

Sound familiar to anyone ?

Frozenace

According to those figures, is the government really going to save 839 million pounds?? (3700 * 227k)

Sounds like a lot of money.

opinions4u

michaels wrote: »

Can anyone explain why the benefits can not pay the actual interest bill rather than a one size fits all rate, please?

One of my first ever jobs working for the old Halifax Building Society was advising the DHSS what rate of interest customers were paying on their mortgage.

Most mortgage lenders only had one interest rate back then, and those rates were within 0.5% of each other.

So it made sense to save on paperwork to introduce a single rate which happened, I think, in the early 1990s.

The market has changed massively since then. We have SVRs in the mainstream ranging from 2.5% - 4.99%. We have introductory rates between 2.19% and 6.99%.

So government bodies haven't kept up with the market and a one-size fits all benefit doesn't quite work.

Still, it's not the time to be paying for more staff on the government payroll to cover this. Perhaps claimants should just be grateful that they receive anything at all, especially if they chose not to protect their mortgage.

peterbaker

opinions4u wrote: »

Perhaps claimants should just be grateful that they receive anything at all, especially if they chose not to protect their mortgage.

With respect, this is rather a silly comment, especially from someone who has both industry experience and MSE experience. You are implying that benefit claimants with mortgages should have purchased Mortgage PPI as if that is some universal solution for the public good which I recall is more or less how a naive young Tony Blair described it when he moved the start date for full mortgage interest benefit out to 9 months from the date of first registering for JSA.

Mortgage PPI is of course no better than any other PPI as "protection" - the 'successful claim' statistics being scandalously low for all types of PPI - so how else are unfortunate benefit claimants supposed to have protected themselves?

mbeast

there's a 99% chance I'm now going to lose my house
I was happy paying £570 per month whilst working as well as managing to cover all my other bills but due to illness I'm unable to work now although i wish i could (even more so now).
At the time when i remortgaged I thought I got a good deal getting a fixed rate at 5.9% for 10 years a few years ago (if only i knew rates where going to drop ) so atm I'm just able to cover all the household cost and I'm left with £80 to feed and cloth me, my wife and my 3 month son and a little for fuel for the car in emergencies.
I've already accepted that in January I'll no longer be able to run the car when the mot and insurance run out as there's no way of getting the money to cover the cost but as long as we have the house and some food all is well.
now the goverment is going to cut the amount that I can get to help pay towards my mortgage cost :@, atm I get £408 per month and pay the other £162 per month myself which I'm just able to do but from October I'll be getting around £30-£40 per week less which means feeding and clothing the 3 of us on £40 to £50 per week which is going to be impossible .
I've contacted my mortgage company who due to me having to go bankrupt can't change me over to interest only and I can't remortgage to a lower rate so I'm up the creak without a paddle.

I've contacted my local council who can't help unless I have a repossession order and then will only put me in temporary housing until a 2 bed place comes available so i asked how much help I would get towards private renting if I could find a place, £110 per week :@
I'm like what the hell, I can get £110 per week towards private rent but can't get that towards my mortgage. I thought that was bad enough at getting £101 per week now towards my mortgage but its a real kick in the nuts when my payments drop to £60-70 per week.
where is the common sense in me losing my house to go into private / local housing where there going to have to pay more towards it.
how the hell is the government saving money doing this is beyond me.

before people shout payment protection, that only payed out for the 1st year and if work was a option then trust me I'd be there right now instead of typing this .

peterbaker

mbeast, might be worth seeking advice in the Debt Free Wannabe or Bankruptcy forums if you haven't already ... it is easy to say, but I don't think you need worry unduly about losing the house or the car if you have already made the decision to apply to be declared bankrupt ... I am no expert but there are definitely experts on this in those other forums.

michaels

Thanks for this.

My thought is that rather like PAYE is done by the employer, surely the govt could push all the administration costs on to the mortgage companies - they are after all benefitting from having the interest paid so are less likely to have to repossess/manage arrears etc so why shouldn't they put up with the administrative cost.

opinions4u wrote: »

One of my first ever jobs working for the old Halifax Building Society was advising the DHSS what rate of interest customers were paying on their mortgage.

Most mortgage lenders only had one interest rate back then, and those rates were within 0.5% of each other.

So it made sense to save on paperwork to introduce a single rate which happened, I think, in the early 1990s.

The market has changed massively since then. We have SVRs in the mainstream ranging from 2.5% - 4.99%. We have introductory rates between 2.19% and 6.99%.

So government bodies haven't kept up with the market and a one-size fits all benefit doesn't quite work.

Still, it's not the time to be paying for more staff on the government payroll to cover this. Perhaps claimants should just be grateful that they receive anything at all, especially if they chose not to protect their mortgage.

mbeast

peterbaker wrote: »

mbeast, might be worth seeking advice in the Debt Free Wannabe or Bankruptcy forums if you haven't already ... it is easy to say, but I don't think you need worry unduly about losing the house or the car if you have already made the decision to apply to be declared bankrupt ... I am no expert but there are definitely experts on this in those other forums.

I went bankrupt Jan 2008 and only got to keep the house due to negative equity and was pleased at the time I'd get to keep my house but now it seems I've jumped out of the frying pan and into the fire.

I don't know what I hate the most, most likely losing the house now or the fact that if the mortgage was in someone else name I'd be able to get £110 per week towards it and would be able to stay