Summer Budget 2015 : SMI changes, support for mortgage interest.

glennamy

tea-bag wrote: »

Good another loop hole closed. People have had there mortgage payed off completely by the taxpayer. It is just a shame it is not retrospective.

Incorrect, they do not get their mortgages paid off, they get help with paying the interest on the loan, the loan stays the same...

[Deleted User]

i saw this coming back in 2011 to the point where we sold up down sized and paid off the mortgage in full
i totally disagree with anyone who thinks the new rules are right,39 weeks is far too long to wait(always was),many claimants made their choice many years ago to buy or rent and they should continue to be treated differently and not from 2018 punished for buying

BigAunty

I haven't unearthed the link but I did read a proposal paper that the govt published a few years ago about SMI as they outlined the issues they had and the alternatives they wanted to explore as possible options. Hopefully another poster can find it.

From memory (so apologies for any inaccuracies and feel free to challenge it), just over half of the people who get SMI are on pension credit and I think around 110,000 people get it. My assumption is that this means that tens of thousands of people retired without managing to pay off their mortgages (and some might think this is quite an elemental mistake in personal financial planning and critics will say its up to the house owners to take out insurance products against illness, disability and redundancy with their mortgage).

The govt wants SMI to be a brief safety net for those who can be reasonably expected to return back into employment and pay their mortgages themselves. Again, I think the paper said SMI disincentivised job seekers from taking even part time employment as all their SMI disappeared.

They were open to changes to SMI that would time limit it (some claimants with certain types of benefits have no time limits and I do recall a poster popping up on this forum claiming to have received it for 13 years). Also, the govt seemed open to potentially making it into a loan, perhaps by putting a charge on the house.

I believe this paper cited quibbles with the taxpayer funding what is essentially a private investment which could increase through price inflation an asset that can then get inherited by their relatives. Wish I could find the paper so I can be sure my recollections are accurate.

When Beveridge set up the original welfare state, he was very impressed with the type of community and welfare associations run by trade organisations, etc, for the benefit of their members. He anticipated that the new welfare system would run alongside separate contributory private provision of this type. These seem to have died after the welfare state was introduced. Again, I'd need to re read Beveridges paper to understand exactly what he said about individuals supporting themselves and ensuring the govt didn't do everything, that people were paid towards insurance policies to help them when they experienced temporary need.

I do take your point about how SMI can be equal or less than housing benefit but HB and private tenure are completely different beasts.

BigAunty

glennamy wrote: »

Incorrect, they do not get their mortgages paid off, they get help with paying the interest on the loan, the loan stays the same...

But with property price inflation and perhaps with a bit of downsizing or moving to a cheaper area, its possible to sell up and buy a new property outright. This is despite the fact that only the interest part of the mortgage is paid off.

Not every SMI claimant is on an interest only mortgage. I do recall one poster on this forum who was on a repayment mortgage who said their other benefits covered the remaining mortgage expense, assume they had a small mortgage and/or high benefits.

In that particular case (and I don't imagine its a common one) essentially the taxpayers were wholly funding their entire remaining mortgage balance.

FBaby

many claimants made their choice many years ago to buy or rent and they should continue to be treated differently and not from 2018 punished for buying

Then it is their error to believe that because they got on the property ladder it meant them being homeowners forever. It doesn't work this way but as it's been mentioned already, you have a much better chance of staying so if you bother to take mortgage protection insurance when you take your mortgage out. Why people don't is beyond me.

tgroom57

BigAunty wrote: »

Not every SMI claimant is on an interest only mortgage. I do recall one poster on this forum who was on a repayment mortgage who said their other benefits covered the remaining mortgage expense, assume they had a small mortgage and/or high benefits.

In that particular case (and I don't imagine its a common one) essentially the taxpayers were wholly funding their entire remaining mortgage balance.

In the case you give above, SMI would still only pay interest, and at the govts rate not the building soc rate. If they choose to pay more off the mortgage because they receive enough in other benefits then it may be because the total of other benefits is high - an issue which will hopefully be addressed by the new cap. You would withhold SMI because other benefits are being paid?

What they choose to do with "spare cash" is their business. Most buy lottery tickets, many buy recreational drugs, why are you so hard on those who invest in their prime asset? One single guy posted this week that he saved £16,000 whilst working part-time & claiming appropriate bens (not inc SMI). Are you hard on him too?

marliepanda

glennamy wrote: »

Incorrect, they do not get their mortgages paid off, they get help with paying the interest on the loan, the loan stays the same...

Also incorrect as the rate paid by SMI is over 3% and many pay less than 1% interest.

Facts straight before speaking always helps.

bloolagoon

tgroom57 wrote: »

In the case you give above, SMI would still only pay interest, and at the govts rate not the building soc rate. If they choose to pay more off the mortgage because they receive enough in other benefits then it may be because the total of other benefits is high - an issue which will hopefully be addressed by the new cap. You would withhold SMI because other benefits are being paid?

What they choose to do with "spare cash" is their business. Most buy lottery tickets, many buy recreational drugs, why are you so hard on those who invest in their prime asset? One single guy posted this week that he saved £16,000 whilst working part-time & claiming appropriate bens (not inc SMI). Are you hard on him too?

Some literally have their mortgages paid off by SMI alone. until the recent interest rate reduction the SMI hadn't reflected mortgages. It still remained quite high over true interest rates for quite some time.

tgroom57

bloolagoon wrote: »

Some literally have their mortgages paid off by SMI alone. until the recent interest rate reduction the SMI hadn't reflected mortgages. It still remained quite high over true interest rates for quite some time.

Then this is a problem with the implementation, not with the concept.

rogerblack

To raise a related matter.
On UC, previously, there has been a very, very nasty cliff-edge where someome was getting SMI - if they earned one pound, all their SMI will stop.

Does this 'loan' function in the same way - or can you still be paid it even though earning a low wage?