mortgage benefit cut

BigAunty

Having equity in the property does not stave off repossession - it isn't liquid and is difficult to draw upon.

The purpose of the scheme is to prevent repossession. I wonder what the cost will be to the state if they didn't have this scheme and therefore local councils would have to house tens of thousands of households in social housing or private housing, at a cost of millions in terms of housing benefit.

I read a DWP article that indicated very few households have savings over 16k, this is why they aren't bothered about this threshold for benefits, plus the justification that those with means should spend it on supporting themselves.

We see loads of posts on this forum from benefit claimants who come into a windfall who are shocked and indignant that they should use it to pay for their own rent and council tax, ordinary living expenses, because they have got accustomed to the tax payers shelling out for them.

You are priced out of the property market but there are plenty of countries (albeit with a much better rental market) where the obsession and sense of entitlement to property ownership is not present. In the UK, there is a culture of feeling that a person is lacking unless they own their own property - in other societies, this inferiority complex does not take place.

numpty888

I think that someone with millions in equity in their property has greater "means" than someone with £16,000 in savings.

Actually there would be little to no cost to forcing people who have equity in their properties to move or sell. If they sell - they would most likely have more than the savings limit so the government wouldn't give them anything either.

If the government massively swings the balance in favor of home ownership you can hardly be surprised that everyone wants to become a home owner.

Based on democracy and with home ownership as a percentage of the population rapidly falling - maybe over time this balance will swing back. Demographics is everything...

I read somewhere that the % of home ownership in London is now below 50%. If I were in a Conservative led government that would worry me!

numpty888

I guess my real question is why are benefits tied to income and not "net worth"?

BigAunty

The type of economy that causes people to lose their jobs is also the type of economy where property sales start grinding to a halt which is clear from the posts from distressed sellers on the house buying forum. They may have 'means' but not necessarily be able to realise them.

While the home ownership percentage of the population may be falling, household and population growth is still onwards and upwards, leading to pressure on the housing infrastructure which isn't keeping pace. This means that rents are rising so it will get more expensive for tax payers to subsidise the ever expanding LHA/HB bill, which includes those who have been evicted from repossessed properties.

I don't mind that the Support for Mortgage Interest scheme is potentially being overhauled. I also don't feel sorry for those who can't afford to buy properties.

numpty888

Clearly the economy has been better right!

But lets be honest - people could sell their houses if they were prepared to accept a lower price. If someone has positive home equity and doesn't have enough income to support their mortgage they should sell up. This requires no repossession. Why should my tax go to pay for this otherwise.

Effectively this is just distorting the house prices and forcing people who maybe should move to stay where they are. It taxes the poor (low net-worth) and gives it to the rich (high net worth).

With massive house price distortions and unsustainable interest-rates - it is no wonder that people are reluctant to buy and there is no market. If everyone knew what a "fair" house price was then maybe we could have a working (less broken) economy again!

seeya23

i owe more on mortgage so may as well get repossession and get a Council house then i will be £160 a month better off

MissMoneypenny

BigAunty wrote: »

Perhaps a better way would be to put the responsibility back on the homeowner, not through placing a charge on the property which seems a huge scheme to manage and can only really be realised when the property is sold, but to make it compulsory for a person with a mortgage to have sickness/unemployment insurance?

Or for those that didn't bother to take insurance, a maximum limit of 1 year of welfare help in a lifetime? The propety owner will then have up to 12 months to find another job or to sell their house and live off the equity at a sensible rate of spending, so that they don't deprive themselves of capital for any future welfare claims.

BigAunty

numpty888 wrote: »

...
But lets be honest - people could sell their houses if they were prepared to accept a lower price. If someone has positive home equity and doesn't have enough income to support their mortgage they should sell up. This requires no repossession. Why should my tax go to pay for this otherwise.

I know the theory that a property will always sell if it is reasonably priced but that's a rather optimistic analysis in a recession.

In areas with large numbers of properties on the market and few buyers, the majority of properties are not going to sell or sell on a timely basis.

When I've bought and sold property, the conveyancing process alone has typically taken 3 months alone, excluding the marketing period until there is an interested buyer.

So a distressed seller still needs a mountain of money to prevent the property being repossessed before a buyer is found and the legal process has completed.

numpty888 wrote: »

...


Effectively this is just distorting the house prices and forcing people who maybe should move to stay where they are. It taxes the poor (low net-worth) and gives it to the rich (high net worth).

Your tax payer contribution may actually increase if the support that prevents mass repossessions and that may trigger the collapse in property prices.

You seem to fail to factor in that those evicted will require housing benefit.

BigAunty

MissMoneypenny wrote: »

Or for those that didn't bother to take insurance, a maximum limit of 1 year of welfare help in a lifetime? The propety owner will then have up to 12 months to find another job or to sell their house and live off the equity at a sensible rate of spending, so that they don't deprive themselves of capital for any future welfare claims.

Yes, time limited conditionality seems a valid option. At the moment, I believe SMI is limited to 2 years anyway.

Another alternative is that the property is bought by a social housing landlord and the owner becomes the tenant. Again, I believe that there is a scheme that operates in this way but I'm not too familiar with the actual details of this.

numpty888

Okay - I feel like I should prolly give others a chance maybe now....

But I think people who have "negative equity" and would suffer repossession should receive benefit.
It is truly terrible to have negative equity and no job.

My annoyance is with those with "positive equity" (possibly very large equity) who also receive mortgage benefit.
This is getting tax payers to give them ability of timing when they sell.
It's just supporting the greed of people who are already rich.
Just get them to settle for a bit less (lower price but still +ve equity) than they would otherwise have got.