Universal credits and mortgages

banner188

Does anyone know if there will be any provision in the universal credits for those low paid workers with mortgages?I know under the present system there is for mortgage interest payments for the very low paid or unemployed.
I know the arguments against it, but to give an example, we have a small mortgage, less than £450 a month. We don't take up any vital social housing and obviously have to cover our own repairs and maintenance.
Someone in the Same position as us but in rented property would be about £400 a month better off due to HB they would receive.


I understand that after the mortgage term we own a property, but when you factor in that someone in rented property may cost the tax payer for 50-60 years and the extra costs of maintenance. Also any low paid workers who decided to sell their property would be subject to the UC rules on capital, so it isn't an obvious asset in those regards.
Also, you hear that many who get older having to sell their properties to pay for care.
I know there will be many strong opinions about this, but it just seems to me that if you are a low paid worker it is wiser not to try better yourself, certainly not by buying property anyway, because it seems that you pay extra in the short term only to have it taken from you in the long term, whereas
those in social and private rented properties get HB ad infinitum, have no worries with repairs etc..., week to week they have a better standard of living which is frustrating when I see it all around me.

BigAunty

The current scheme that pays the interest only part of mortgages doesn't apply to those on low incomes, AFAIK, and some can currently receive it indefinately, like HB, for example - there was a poster who said he'd received it for 13 years.

https://www.gov.uk/support-for-mortgage-interest/eligibility

I don't know the position under UC when it comes to schemes to prevent repossession of properties from home owners.

However, the problem with long-term dependency is that if the claimant cannot afford the repayment part of their mortgage then when the term expires, the lender is unlikely to extend and they must either sell or be repossessed.

See if the Shelter website has any info on proposed changes to SMI.

BigAunty

banner188 wrote: »

..
I know there will be many strong opinions about this, but it just seems to me that if you are a low paid worker it is wiser not to try better yourself, certainly not by buying property anyway, because it seems that you pay extra in the short term only to have it taken from you in the long term, whereas
those in social and private rented properties get HB ad infinitum, have no worries with repairs etc..., week to week they have a better standard of living which is frustrating when I see it all around me.

A mortgage is a private financial contract between an individual and the lender, not with the government. Investments are risky so why I can see why the govt want to limit repossessions, I'm not really sure that long term state support to pay off a person's private loan is a workable idea.

Low paid people generally don't generally buy property. If someone has a drop in income, they normally change their expenses to meet it.

Private tenants have extremely limited security of tenure and most tenancy agreements are no longer than 6 months.

Social housing tenants are much more likely to live in areas of social deprivation or in communities that suffer from all the usual nuisances that come with tenants with low rates of employment.

I cannot see any enlargement of the SMI type schemes from the govt. They instigated many changes in HB because the cost doubled under Labour's tenure. They are reducing the spending on benefits as when they came into power, more was paid out than paid into the state purse through employees PAYE, a very healthy imbalance.

The current govt are anti-state intervention, want to wean people off benefits and are doing their best to slash welfare spending. While I don't know of any plans to change SMI, I can't see any future changes to extend it to the low paid.

banner188

Some good points, cheers. I agree, the government shouldn't be expected to pay towards mortgages, but I just think it should be looked at closer.
People who get housing benefit are getting that benefit because the government is basically saying that they would fall below an acceptable level of income were they not to get it, but those with mortgages, such as myself can be living on £100 less than this level every week.


Maybe an element of help towards maintenance or repairs, or help towards the interest would redress the balance somewhat?

BigAunty

banner188 wrote: »

...
People who get housing benefit are getting that benefit because the government is basically saying that they would fall below an acceptable level of income were they not to get it, but those with mortgages, such as myself can be living on £100 less than this level every week.


Maybe an element of help towards maintenance or repairs, or help towards the interest would redress the balance somewhat?

Yes, it's always been possible for a homeowner to have less disposable income because of their mortgage payments and repair costs compared with someone on HB. But that's the risk they take when a person takes out what is basically a huge loan.

Nobody makes a person buy a house - the mortgage is a private matter, a personal loan. They get the reward (property price inflation, their own place, something to pass on as an inheritance) and therefore they should take responsibility for the risks.

To mitigate the risk, they can take out mortgage insurance. Perhaps the govt should just make this compulsory or set up a state scheme where homeowners make provisions for future illness or redundancy?

Even a housing tenant, whose income fluctuates or household size changes, faces changes in their HB - they are not immune to having to make top-ups towards their rent from their employment or benefit income. If this is not tenable, then they move to a smaller or cheaper property.

Social housing tenants in the future will have to downscale as rooms become vacant if they can't afford the drop in HB for having unoccupied bedrooms. They are no longer being cushioned from economic reality in the way they've been immune in the past.

Some charities and councils do run schemes to help poor homeowners with repairs who fulfill certain criteria - the warmfront scheme, handyman schemes and so on. Again, if they can't afford to maintain the property, they have an option to sell up.

BigAunty

There's a little info on the Shelter website about SMI

Help with mortgages when universal credit is introduced

Universal credit will contain a payment to help with mortgage interest, but this will only be available for universal credit claimants who are not doing paid work. You may have to wait for some time before entitlement begins, and it may only be for a limited amount of time.

Universal credit claimants who have mortgages may have to reconsider their housing options if their benefits are too low to allow them to keep up with their payments. Mortgage arrears and repossession will be a risk.

http://england.shelter.org.uk/get_advice/help_with_housing_costs/universal_credit

I wonder whether this will be part of, or in addition to, the benefit caps that are being proposed.

Limits to the total benefits claimed - the benefits cap

Universal credit will have a benefits cap - benefit will usually only be paid up to a maximum of £500 per week for couples with children or lone parents, and £350 per week for a single person.

BigAunty

Here is the government's stance on SMI under UC and it seems that the current indefinate payment of it to the sick, pensioners and disabled is going to be scrapped.

"The Government is committed to continue providing support for mortgage interest in future, to assist those owner-occupiers who qualify for this help to remain in their homes and avoid repossession as far as possible. Our strategic vision for support for mortgage interest in the future is that it should provide short-term help to people at a time of personal crisis such as loss of employment or relationship breakdown, and incentivise work. This is because it is only through full-time work that mortgages can ultimately be re-paid.

Most owner-occupiers should be aiming to move from short-term SMI into full time work to support their housing tenure or they should take other steps, such as selling their homes and downsizing, if they are unable to sustain their mortgages.

In circumstances where people need long-term help with their mortgages because they are disabled or have retired with outstanding mortgage liabilities, the Government believes that it is not fair to pay SMI indefinitely without recouping some of the cost to taxpayers, through sharing in the asset gain to those individuals made possible by the support from the State. The Government believes that for new claims in the future, in exchange for supporting someone to live in their own home whilst they are on benefit for long periods, the best approach would be to put a charge on their properties to recoup the SMI paid. The Government is still considering this option.

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmworpen/writev/576/m32a.htm

banner188

BigAunty wrote: »

There's a little info on the Shelter website about SMI

Help with mortgages when universal credit is introduced

Universal credit will contain a payment to help with mortgage interest, but this will only be available for universal credit claimants who are not doing paid work. You may have to wait for some time before entitlement begins, and it may only be for a limited amount of time.

Universal credit claimants who have mortgages may have to reconsider their housing options if their benefits are too low to allow them to keep up with their payments. Mortgage arrears and repossession will be a risk.

http://england.shelter.org.uk/get_advice/help_with_housing_costs/universal_credit

I wonder whether this will be part of, or in addition to, the benefit caps that are being proposed.

Limits to the total benefits claimed - the benefits cap

Universal credit will have a benefits cap - benefit will usually only be paid up to a maximum of £500 per week for couples with children or lone parents, and £350 per week for a single person.

Thanks, I will look. The help with interest seems to be similar to now.
I suppose the fundamental problem is that benefits are awarded according to income rather than outgoings, which is correct for the most part, but in terms of a mortgage where you are attempting to lift yourself from social dependency, i thought there may have been an exception, but it is what it is.

princessdon

I am with the OP on this one, short term help for low paid should be given via SMI. Redundancy can happen to anyone, the interest is often very low and support for low income earners if 1 partner is made redundant for a short period of time should be permitted.

But it's not ..