Support for mortgage interest benefit cut by thousands of pounds

silvercar

Those that have housing benefit or LHA paid do not make any money but those on ISMI can potentially make a fortune.

Lets look at the "fortune" that can be made. Please remember that no-one makes money, all the SMI goes to the lender to pay the mortgage. If it covers more than just the interest then some capital is repaid - none of it goes to the borrower.

Maximum SMI is for a mortgage of 200k. Nothing is paid for the first 3 months (previously 6-9 months) so the borrower would have 3 months of arrears.

The SMI is dropping to 3.63 as this was the average rate that people are paying. So the average cost of a mortgage of 200k for a year is at 3.63% and is £7260. So the average benefit to anyone claiming over a whole year would be 9 months at 6.08% is £9120. Extra capital repaid is a grand fortune of....£1860.

Reducing your mortgage from 200k to £198,140 is not that exciting.

The average now will be zero as the rate has been reduced to the average level.

Now the second part of your statement, that tenants get nothing. Compare that with LHA where upto £15 a week can go to the tenant = £780 a year legitimately. As all the rent payments go to the tenant, rather than direct to the bank as with SMI, if a tenant doesn't pay all the rent over they are actually getting a lot more in their pocket.

carolt

silvercar wrote: »

There has to be some parity between people getting support to pay their rent and people getting support to pay the interest on their mortgage.

LHA is a cheap and cheerful calculation, as is SMI. Winners and losers on both but what we don't want to see is the administration costs of running the scheme eating up thousands of taxpayers money.

Two problems with the idea of superficial parity.

The first and most glaring is that neither are currently "cheap and cheerful" as you claim - they're both outrageously expensive, as my earlier posts pointed out.

Secondly, is the fact that in rental terms, you can only claim LHA according to your needs ie according to family size. (And yes, I know there are issues with how needs are defined for those on benefits, versus how they are blithely ignored for those of us in private rentals, who pay their own way, but the basic principle at least is there.) Whereas if you, as a single person, bought a huge 5 bedroom house you could neither need nor afford, by lying on your forms to get your mortgage, you can then be supported by the taxpayer for an extrememely long (possibly indefinite) time to remain in that house - a luxury the renter would not have. Plus no blooming landlord to deal with, your 'own' home - except paid for by the rest of us.

I think that those who claim help with mortgages should only be allowed to claim amounts based on their needs - not their aspirations. Same as applies to those renting.

Graham_Devon

StevieJ wrote: »

It seems to be the economics of greed and envy, I don't care if it costs more just as long as we don't pay their mortgages, but we all know what is actually behind it, don't we?

What's behind it, is it's not fair that two different families in a street are treated differently based on whether one has a valuable house, and mortgage.

However, your point is a good one. It does rather seem that all those who have a vested interest in keeping house prices high (i.e. they may have investments outside of just a home) all wish for the taxpayer to keep people in homes they cannot afford.

Whereas those who do not hold a vested interest, i.e. may just have a home or have to rent themselves, want to see an end to SMI after a set period, and an end to propping up owners who simply cannot afford what they have taken on, putting those people in the same boat as thousands of others who cannot afford a home.

It's simply not fair to support a certain group, through taxpayers collective money. None of those who have vested interests seem to want to touch on the fairness part.

StevieJ

carolt wrote: »

Two problems with the idea of superficial parity.

The first and most glaring is that neither are currently "cheap and cheerful" as you claim - they're both outrageously expensive, as my earlier posts pointed out.

Secondly, is the fact that in rental terms, you can only claim LHA according to your needs ie according to family size. (And yes, I know there are issues with how needs are defined for those on benefits, versus how they are blithely ignored for those of us in private rentals, who pay their own way, but the basic principle at least is there.) Whereas if you, as a single person, bought a huge 5 bedroom house you could neither need nor afford, by lying on your forms to get your mortgage, you can then be supported by the taxpayer for an extrememely long (possibly indefinite) time to remain in that house - a luxury the renter would not have. Plus no blooming landlord to deal with, your 'own' home - except paid for by the rest of us.

I think that those who claim help with mortgages should only be allowed to claim amounts based on their needs - not their aspirations. Same as applies to those renting.

I have told you a trillion times not to exaggerate

ukcarper

Graham_Devon wrote: »

What's behind it, is it's not fair that two different families in a street are treated differently based on whether one has a valuable house, and mortgage.

However, your point is a good one. It does rather seem that all those who have a vested interest in keeping house prices high (i.e. they may have investments outside of just a home) all wish for the taxpayer to keep people in homes they cannot afford.

Whereas those who do not hold a vested interest, i.e. may just have a home or have to rent themselves, want to see an end to SMI after a set period, and an end to propping up owners who simply cannot afford what they have taken on, putting those people in the same boat as thousands of others who cannot afford a home.

It's simply not fair to support a certain group, through taxpayers collective money. None of those who have vested interests seem to want to touch on the fairness part.

The way I see it is fairer to keep someone in their house with the risk it might increase house prices instead of chunking them out in the hope that it will reduce house prices.

I would hazard a guess that the average length of time people stay on SMI is a lot less that people stay on LHA

doire_2

Let them burn. I dont want my taxes being spent on their debt

silvercar

I broadly agree but,

carolt wrote: »

Two problems with the idea of superficial parity.

The first and most glaring is that neither are currently "cheap and cheerful" as you claim - they're both outrageously expensive, as my earlier posts pointed out.Its the calculation that is cheap and cheerful not housing costs.

Secondly, is the fact that in rental terms, you can only claim LHA according to your needs ie according to family size. (And yes, I know there are issues with how needs are defined for those on benefits, versus how they are blithely ignored for those of us in private rentals, who pay their own way, but the basic principle at least is there.) Whereas if you, as a single person, bought a huge 5 bedroom house you could neither need nor afford, by lying on your forms to get your mortgage, you can then be supported by the taxpayer for an extrememely long (possibly indefinite) time to remain in that house - a luxury the renter would not have. Plus no blooming landlord to deal with, your 'own' home - except paid for by the rest of us.
Fine, except that you "only" get the first £200k of mortgage taken into account. Round our way you are not going to find a 5 bedroom home for anything like that.

I'm excluding liars. People lie to get mortgages and people who claim help with their rent don't use all their benefit to pay their rent. You can't base analysis of the behaviour of liars.

I think that those who claim help with mortgages should only be allowed to claim amounts based on their needs - not their aspirations. Same as applies to those renting.
Needs change over time. Earlier it was quoted that half the recipients of SMI are pensioners, many must be living in the home that housed their, now independent, children and could move somewhere smaller. We don't generally force pensioners out of their homes.

Graham_Devon

ukcarper wrote: »

The way I see it is fairer to keep someone in their house with the risk it might increase house prices instead of chunking them out in the hope that it will reduce house prices.

I would hazard a guess that the average length of time people stay on SMI is a lot less that people stay on LHA

Why is it fairer though?

This isn't about house prices. It's about fairness, from the collective tax pot. You are looking at this from a house price point of view, and it's skewing your perception of it, I'm sure, as you personally want houses to keep their prices.

Why should person A get their mortgage interest (and sometimes capital) paid from the tax pot, and get the benefit of the house at the end of the term.

Whereas person B gets rent only paid, and no benefit of any house, or anything they can take with them at the end of the term?

Both are taxpayers, both have families.

How is the situation fair, considering they both pay into the tax pot and both cannot afford to buy a house?

wherediditallgothen

doire wrote: »

Let them burn. I dont want my taxes being spent on their debt

Well lets hope your circumstances never take a nosedive then.

chucky

doire wrote: »

Let them burn. I dont want my taxes being spent on their debt

the problem is that you'll be paying even more taxes if you let them get repossessed...

it's the bigger picture you need to understand...