Support for mortgage interest (SMI) extended AGAIN

julieq

It's a bizarre loophole that SMI pays interest in perpetuity against a predictible event - retirement - but on the other hand if you think any government is going to take the political hit of forcing the elderly to sell their homes of many years to save the peanuts that SMI costs, you're a few quid short of a full repayment basically.

chucky

ILW wrote: »

Yes, but they don't get to keep any increased value in the property.

i thought property prices were falling and going to fall until normal people could afford them - is it increasing in value now?

people can't have it both ways

ukcarper

* getting paid SMI for up to two years only if you are getting income-based Jobseeker’s Allowance

There is no limit to how long you can get SMI if you are getting:

* Income Support
* income-related Employment and Support Allowance
* Pension Credit

What does this mean from directgov website the way I read it the only people who don’t get it indefinitely are those on income-based jobseekers

abaxas

RenovationMan wrote: »

Agree, but to play the 'devil's advocate' for a moment...

What we are saying is that those pensioners who work hard and buy their own house have to sell them to fund their retirement accomodation, yet those pensioners who have never worked get a roof over their head for free?

Yes!

That doesn't mean the quality of accommodation will be high. That is where the problem lies.

Graham_Devon

RenovationMan wrote: »

Do pensioners in receipt of pensions credit and living in rented accomodation get their rent paid for life too?

The difference here is:

Person 1: Is in rented accomodation and has £6,000+ in the bank. No assets, rents, therefore, does not get housing benefit. Expected to pay their own way, until capital depriciates under £6,000.

Person 2: Is in rented accomodation and has £4,500 in the bank. No assets, therefore gets rent paid via LHA for a house big enough for their needs only.

Person 3: Is in rented accomodation, has £1,000 in the bank and £32,000 worth of shares. Has to sell shares to pay their own rent as will not qualify for LHA due to assets

Person 4: Has a mortgage and £45,000 worth of shares. In negative equity, will not get SMI....needs to sell assets (shares) and has to pay stamp duty and maybe capital gains to release shares and use them to pay for mortgage before qualifying for SMI.

Person 5: Has £4,000 in the bank, and a mortgage from 1990. Asset equity of £145,000. 4 beds, kids moved out. Get's SMI.

Every year, as the remainder of the mortgage falls, the SMI stays static, therefore, paying off a chunk of the capital each and every month, as each and every month passes, chunk gets larger. Amount person 5 has to contrinute gets smaller and smaller as months pass....or mortgage gets paid off far quicker than otherwise would have been.

Person 5 then finishes mortgage, SMI stops. Person 5 now has £4,000 in bank, plus £165,000 worth of assets, which the taxpayer has collectively paid at least some money towards to either pass down to kids tax free, or use equity to sell up and either rent, or downsize and enjoy the profits.

julieq

There's also the point that the elderly are expected to fund long term care from their homes if they have them. So it's a bit of a case of giving with one hand and taking away with another.

As to why the bears get so exercised about this particular benefit, it can only be in the mistaken belief that it props up the housing market. It doesn't, the amounts involved don't come close to being big enough.

julieq

Graham, SMI pays interest so it doesn't on average decrease the amount of mortgage outstanding. If the amount of mortgage outstanding decreases due to marginal overpayment, so does the interest and the payment reduces.

It's always possible to create hypothetical cases which create the impression of unfairness. But they're not typical, and in any case the only people who are actually bothered is you and a handful of bears who want house prices to fall via forced sales.

Do that at the expense of the elderly and you're going to be spat at in the streets, which is why no politician would ever suggest it. In any case, before long the houses get sold one way or another anyway due to death or care home requirements and all you've actually changed is the amount of time an old person has been able to stay in his or her home.

ukcarper

Graham_Devon wrote: »

The difference here is:

Person 1: Is in rented accomodation and has £6,000+ in the bank. No assets, rents, therefore, does not get housing benefit. Expected to pay their own way, until capital depriciates under £6,000.

Person 2: Is in rented accomodation and has £4,500 in the bank. No assets, therefore gets rent paid via LHA for a house big enough for their needs only.

Person 3: Is in rented accomodation, has £1,000 in the bank and £32,000 worth of shares. Has to sell shares to pay their own rent as will not qualify for LHA due to assets

Person 4: Has a mortgage and £45,000 worth of shares. In negative equity, will not get SMI....needs to sell assets (shares) and has to pay stamp duty and maybe capital gains to release shares and use them to pay for mortgage before qualifying for SMI.

Person 5: Has £4,000 in the bank, and a mortgage from 1990. Asset equity of £145,000. 4 beds, kids moved out. Get's SMI.

Every year, as the remainder of the mortgage falls, the SMI stays static, therefore, paying off a chunk of the capital each and every month, as each and every month passes, chunk gets larger. Amount person 5 has to contrinute gets smaller and smaller as months pass....or mortgage gets paid off far quicker than otherwise would have been.

Person 5 then finishes mortgage, SMI stops. Person 5 now has £4,000 in bank, plus £165,000 worth of assets, which the taxpayer has collectively paid at least some money towards to either pass down to kids tax free, or use equity to sell up and either rent, or downsize and enjoy the profits.

What about the 50% whose smi doesn’t cover interest outstanding mortgage gets bigger each year.

Graham_Devon

julieq wrote: »

Graham, SMI pays interest so it doesn't on average decrease the amount of mortgage outstanding. If the amount of mortgage outstanding decreases due to marginal overpayment, so does the interest and the payment reduces.

I'm not going to argue this one. Theres no need, it's already been accepted that 50% get capital paid down each month due to their mortgage rates.

The payment only reduces once a review has taken place. I'm sure I read a review takes place every 2 years for those on pension credit. Theres scope there for extra capital each month, for 23 months, to be paid off.

Either way, whichever way you look at it, the mortgage is paid off quicker than it would have been.

Can argue the toss about the small print and micro argue this one, but I think the point was made above, so I won't be arguing the macro elements.

ukcarper

ukcarper wrote: »

What about the 50% whose smi doesn’t cover interest outstanding mortgage gets bigger each year.

To be honest I would think that it would be reasonable that if a pensioner has a large amount of equity in their house they should downsize or take equity release to pay off outstanding mortgage.