Support for mortgage interest (SMI) extended AGAIN

Generali

blueboy43 wrote: »

The pensioner number does puzzle me a bit.

Presumably at least some of them are the guys I met. This was in 1995 so 16 years ago, almost to the day. They were mostly in their late 40s and 50s so the majority would now be retired. It's very difficult to see how they would have got any sort of job in the meantime so would still be getting their old, now defunct mortgage dole payments.

ILW

Generali wrote: »

Presumably at least some of them are the guys I met. This was in 1995 so 16 years ago, almost to the day. They were mostly in their late 40s and 50s so the majority would now be retired. It's very difficult to see how they would have got any sort of job in the meantime so would still be getting their old, now defunct mortgage dole payments.

So they would have virtually none of their own money to the purchase of their houses. Totally batty.

Generali

ILW wrote: »

So they would have virtually none of their own money to the purchase of their houses. Totally batty.

I think they would have been paying their mortgage in the normal way and lost their jobs. The state then steps in to pay the interest and principal repayments stop. Presumably in some cases, the interest is still being paid by the state 20 or more years later. As I say it was 16 years ago I met these guys and they were 'long-term unemployed' by that stage already.

julieq

The big loophole for pensioners is that SMI is indefinite for anyone in receipt of pension credit. So if you have a mortgage, the interest is paid for life, and it'd be politically difficult to remove it (think of the frail old people!). So there would be a temptation to borrow some cash pre retirement to modernise a house and then claim the benefit. I've no evidence that's happening, but it is an obvious danger in the system.

julieq

Gen, there are a couple of flaws in your argument. Firstly the relative value of the payments fell over time (with inflation and as interest rates reduce), so eventually it would have become economic to work. And even if you're financially worse off initially due to a benefit loss, many will choose to work as a stepping stone to prosperity.

But basically any benefit system provides a disincentive to work at the margins. It's very easy to locate marginal cases, but they're not typical, and you have to place them in a wider context. Someone in receipt of housing benefit is in the same position more or less, and SMI costs far less than housing benefit even on the most expansive estimate. It's surprisingly inexpensive actually.

Generali

julieq wrote: »

Gen, there are a couple of flaws in your argument. Firstly the relative value of the payments fell over time (with inflation and as interest rates reduce), so eventually it would have become economic to work. And even if you're financially worse off initially due to a benefit loss, many will choose to work as a stepping stone to prosperity.

But basically any benefit system provides a disincentive to work at the margins. It's very easy to locate marginal cases, but they're not typical, and you have to place them in a wider context. Someone in receipt of housing benefit is in the same position more or less, and SMI costs far less than housing benefit even on the most expansive estimate. It's surprisingly inexpensive actually.

It's not so much an argument as a series of anecdotes.

The difference between the people having their mortgage paid under the Old System (OS) and Housing Benefit (HB) is that if the people on OS took so much as a days work, they would be denied being able to go back to OS. They felt it was too much of a risk to give it up in case they lost the job and couldn't get back onto the OS benefit which has been withdrawn to new claimants. If you come off HB and lose your job you just go back onto HB.

I agree with the rest though.:)

blueboy43

ILW wrote: »

So they would have virtually none of their own money to the purchase of their houses. Totally batty.

It only pays the interest
It only pays the interest
It only pays the interest
It only pays the interest

Percy1983

blueboy43 wrote: »

It only pays the interest
It only pays the interest
It only pays the interest
It only pays the interest

It does depnd on the interest rate of said mortgage.

With that when I was unemployed for a whole 2 weeks the government didn't pay the interest on my credit card.

ILW

blueboy43 wrote: »

It only pays the interest
It only pays the interest
It only pays the interest
It only pays the interest

In Generalis example these people would have bought around 15-20 years or so ago

House cost say £40k, value now £200k, amount paid £0.
Pretty good deal for the homeowner, I would have thought that the state should have some sort of claw back arrangement, then all the injustices go away.

Generali

ILW wrote: »

In Generalis example these people would have bought around 15-20 years or so ago

House cost say £40k, value now £200k, amount paid £0.
Pretty good deal for the homeowner, I would have thought that the state should have some sort of claw back arrangement, then all the injustices go away.

Add it to the IHT bill after death.