MSE News: Mortgage benefit to be cut for 167,000 struggling households

From 6 July, the amount the Government pays to recipients of its 'Support for Mortgage Interest' scheme will fall...
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Mortgage benefit to be cut for 167,000 struggling households

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  • poppy10_2poppy10_2 Forumite
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    What about the millions of struggling renters? Don't feel much sympathy to overstretched themselves so much they couldn't cope even in an era with record-low interest rates.
    poppy10
  • silvercarsilvercar Forumite, Ambassador
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    poppy10 wrote: »
    What about the millions of struggling renters? Don't feel much sympathy to overstretched themselves so much they couldn't cope even in an era with record-low interest rates.

    Struggling renters are entitled to claim housing benefit to help with their housing costs, owner occupiers claim support for mortgage interest (SMI).

    Obviously it would not be appropriate for renters to claim SMI as they don't have mortgages!

    The comparison between the 2 is interesting. Renters get their actual rent supported up to a maximum level, based on earnings coupled with a limit. Mortgage holders get an arbitrary interest rate calculation (also limited) which may bare no relation to their actual interest rate.
    I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, in my home and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to [email protected] (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • jmilli2jmilli2 Forumite
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    You make it sound like it's not fair on the mortgage holders. The renters need help with the cost or they would be homeless and in the end apart from a roof over their head they get no benefit in the long run from it. The SMI financially benefits the recipient in the long run by paying some of the interest on the house in effect it's money in your pocket as well as help to keep the roof over your head.
  • silvercarsilvercar Forumite, Ambassador
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    You make it sound like it's not fair on the mortgage holders.

    Not unfair, just arbitrary. If you have a good mortgage deal and a lower interest rate than SMI, you get some capital paid off your mortgage. If your interest rate is higher, you are left with a shortfall. Whereas renters will always get Housing Benefit related to their rent.
    The renters need help with the cost or they would be homeless and in the end apart from a roof over their head they get no benefit in the long run from it.

    Mortgage owners will also be homeless if repossessed and also get no benefit as the SMI is designed to only cover the interest on their mortgage, that some would say is equiv to renting.
    The SMI financially benefits the recipient in the long run by paying some of the interest on the house in effect it's money in your pocket as well as help to keep the roof over your head.

    I don't see how this is 'money in your pocket', it gets paid to the lender to cover the mortgage payments. If they have a repayment mortgage there will be a shortfall.

    If anything it is private renters who have 'money in their pocket' as HB is paid directly to them, in the anticipation that they use it to pay their rent.

    Both are designed to help those on low incomes to keep the roof over their head. SMI is restricted to 2 years, so the pressure is on to increase income or sell up. HB is paid indefinitely.
    I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, in my home and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to [email protected] (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • squeekssqueeks Forumite
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    Selling the house would more than likely give most mortgage holders access to capital that they could use to house themselves in the short to medium term. Which is quite a difference in circumstances between home owners and renters.
  • tgroom57tgroom57 Forumite
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    silvercar wrote: »
    Both are designed to help those on low incomes to keep the roof over their head. SMI is restricted to 2 years, so the pressure is on to increase income or sell up. HB is paid indefinitely.

    Thanks for mentioning this detail ! I never realised how close I was to being homeless- if I'd taken temporary work and subsequently claimed JSA, I'd have certainly lost my home. :eek:

    Renting here costs £450 pcm, whereas my mortgage interest is £110.
  • barrenellybarrenelly Forumite
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    SMI is quite hard to get and 3.63%, let alone 3.12%, nowhere near covers the interest on my mortgage, which is 5%. No, Poppy10, I didn't overstretch myself voluntarily – I had lived with a guy for 34 years before he cleared off to marry someone else and needed his share of the money the house was worth. We had lived twenty of those years mortgage-free, having worked like stink to pay it off in our youth, but now I have been very fortunate five years ago to remortgage for half the value of the house so that I can continue to live in the place I love.

    Paying off this mortgage on a State Pension, plus SMI and Pension Credit, was not what I had planned for my old age, but I have just under twenty years still to go. However, once it is paid off, the state will no longer be supporting my housing, whereas if I were to rent, I would permanently be claiming Housing Benefit towards that.
  • edited 20 June 2015 at 6:04PM
    little_miss_spenderlittle_miss_spender Forumite
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    edited 20 June 2015 at 6:04PM
    barrenelly wrote: »
    SMI is quite hard to get and 3.63%, let alone 3.12%, nowhere near covers the interest on my mortgage, which is 5%. No, Poppy10, I didn't overstretch myself voluntarily – I had lived with a guy for 34 years before he cleared off to marry someone else and needed his share of the money the house was worth. We had lived twenty of those years mortgage-free, having worked like stink to pay it off in our youth, but now I have been very fortunate five years ago to remortgage for half the value of the house so that I can continue to live in the place I love.

    Paying off this mortgage on a State Pension, plus SMI and Pension Credit, was not what I had planned for my old age, but I have just under twenty years still to go. However, once it is paid off, the state will no longer be supporting my housing, whereas if I were to rent, I would permanently be claiming Housing Benefit towards that.
    Barrenelly
    Well said I totally empathise with you! Poppy 10 when it comes to a subject like this, you seriously have to look at the bigger picture, and become knowledgable by doing some research and discovering the facts before making random comments, which could upset a lot of people. Who like myself and others did not overstretch themselves but because of no fault of their own found themselves in a position were they could not afford their mortgage I had taken out mortgage payment protection insurance. But because I tried to foresee all eventualities when it came to getting benefits I was penalised for it. It was a horrible and very traumatic time for us. I have worked damned hard all my life and put enough tax into the pot to pay of my mortgage so please dont tell me it's money in my pocket as far as I am concerned it's my money I am getting back for working so bloody hard for all these years and I hope that many people will agree with me on that point. Sorry I am getting annoyed now but i am very passionate about this subject because so many families have lost their homes since 2006 credit crunch and it served no purpose but to fuel the housing crisis. Just being logical on that point! :mad:
  • damianmcrdamianmcr Forumite
    157 Posts
    What's the problem? Should the DWP pay over and above the average interest? If in future it drops by more than 0.5% then the Standard Interest Rate will drop and if it rise's vice versa.
  • MARTYM8`MARTYM8` Forumite
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    Can we all get the government to pay our mortgage interest?

    I wouldn't mind so much if a charge was placed on the property so that when its sold in the future at a profit the government (and us taxpayers) gets the money back?
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