Support for mortgage interest (SMI) extended AGAIN

ILW

If 51% of recipients are pensioners, they must have known they would not have been able to keep up the payments before taking out the mortgage. What is going on?

julieq

Graham, if it's £2B, it doesn't mean that half of that is going towards paying capital on mortgages. That's not how it works.

The amount going towards paying capital is a fraction of the total. Only those at the ends of the spread would see a significant capital repayment or loss. The average is neutral, and most people would see a small shortfall or a small capital repayment because the actual rates will be clustered around the mid point.

The best guess so far is that the total cost of SMI is £500M or so, and it's probably less than that. I'll ask my MP if you like. But it is a benefit payment for accomodation for homeowners and it's perfectly valid as part of the benefit a taxpayer receives. It's also a lot cheaper than housing benefit and is mostly claimed in small amounts by pensioners. No net effect on house prices. sorry.

ILW

julieq wrote: »

Graham, if it's £2B, it doesn't mean that half of that is going towards paying capital on mortgages. That's not how it works.

The amount going towards paying capital is a fraction of the total. Only those at the ends of the spread would see a significant capital repayment or loss. The average is neutral, and most people would see a small shortfall or a small capital repayment because the actual rates will be clustered around the mid point.

The best guess so far is that the total cost of SMI is £500M or so, and it's probably less than that. I'll ask my MP if you like. But it is a benefit payment for accomodation for homeowners and it's perfectly valid as part of the benefit a taxpayer receives. It's also a lot cheaper than housing benefit and is mostly claimed in small amounts by pensioners. No net effect on house prices. sorry.

I truly cannot understand what pensioners are doing with outstanding mortgages with no income to fund them.

Graham_Devon

julieq wrote: »

Graham, if it's £2B, it doesn't mean that half of that is going towards paying capital on mortgages. That's not how it works.

The amount going towards paying capital is a fraction of the total. Only those at the ends of the spread would see a significant capital repayment or loss. The average is neutral, and most people would see a small shortfall or a small capital repayment because the actual rates will be clustered around the mid point.

The best guess so far is that the total cost of SMI is £500M or so, and it's probably less than that. I'll ask my MP if you like. But it is a benefit payment for accomodation for homeowners and it's perfectly valid as part of the benefit a taxpayer receives. It's also a lot cheaper than housing benefit and is mostly claimed in small amounts by pensioners. No net effect on house prices. sorry.

Your own document states 50% are getting overpayments at todays rates.

Thats 50% getting payments towards capital, whichever way you care to look at it.

I'm not sure how else you can look at it in all honesty.

BTW, I've not once suggested that half of the SMI payment goes towards capital. You can re-read the whole thread again, and you'll not find me suggesting that anywhere, you've just come along with that one.

julieq

Because most of the money they receive goes towards interest. Only a small fraction is overpayment.

Think of it this way. Half the recipients have rates below the 3% top limit. Simplify it to say that half the cash goes to them and half goes to people who with shortfalls. And let's say there is £2B total in the scheme.

The only way we would be paying £1B of capital is if all the people south of the line were paying 0% interest so that all of the £1B was going to pay interest. The spread in the document shows this isn't the case, and the actual interest rate is clustered closer to the limit. That means a large proportion of their payment is interest, and a small proportion is capital repayments. The taxpayer gets that back because the limit is set lower than it should be to provide payments to people north of the line, i.e. the scheme fails to pay what it should for those on higher rates.

The actual amount of capital overpayment is dependent on the spread of rates, but it's going to be small in relation to the size of the fund. And the fund is much smaller than £2B, it could well be lower than £300M. So the actual amount of capital that's being repaid is tiny in absolute terms.

So we're not paying £1B of capital off mortgages or anything like it. We might possibly be overpaying £30-£50M. And this is a much cheaper option for the taxpayer than paying housing benefit which we would have to do were people to lose their homes or move into temporary accomodation, where the bill is verifiably £21B (some of which will certainly be ending up paying capital for BTL landlords).

Graham_Devon

julieq wrote: »

Because most of the money they receive goes towards interest. Only a small fraction is overpayment.

Yes, you are correct. I was using to simple an analogy.

ukcarper

Graham_Devon wrote: »

I know it doesn't work like that. I'm just using what I have access to and taking a figure which I believe to be a fair representation.

Please stop this chucky. I'm giving the figures julie asked me for. I'm giving the facts Julie asked me for.

I can't find the actual average payment, and neither can Julie. However, all things considered, £300 would be a fair guesstimate.

You really think so when 52% are pensioners and another 18% are over 50.

Graham_Devon

ukcarper wrote: »

You really think so when 52% are pensioners and another 18% are over 50.

It's a guestimate.

Provide a better one.

julieq

Think there was some synchronous posting. I just deleted the extraneous explanation.

Percy1983

Sibley wrote: »

At the end of the day anything that keeps families in their homes is a good idea.

I don't disagree with this, but what about the the families who can't afford due to inflated prices, is it right they should pay for other families to have something they don't have themselves?

As harsh as it is, if you can't afford something you shouldn't get to keep it indefinitely, yes they should be give time to sort it out but it should only be for so long.