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Mortgage Benefit Cut That Means Thousands Will Lose Their Homes

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http://www.guardian.co.uk/money/2010/dec/05/mortgage-benefit-cut-lose-homes

Poor things, lets give them some more money as that's the reason I pay my taxes, so people can get there mortgages paid for whilst i'm working my **** off whilst living with my parents!

I will say that I'm genuinly sorry for people who are ill!

Government changes to mortgage benefits for the unemployed will bring misery in 2011 for thousands of people struggling to keep a roof over their heads, a leading homeless charity has warned.

The rate at which Support for Mortgage Interest, a benefit paid to unemployed people, is calculated was cut by 40% from 6.08% to 3.63% at the beginning of October. The charity Shelter is already being asked for advice by homeowners threatened with repossession, as thousands of people face the loss of their homes early next year.

Amanda Copeland, a mother of three young children (see opposite), has been told by her lender, Alliance & Leicester (part of the Santander group), that it will start proceedings to repossess her home in January if she cannot find an extra £400 a month to make up the shortfall in her monthly mortgage interest payments following the SMI cuts.

She says: "I've never claimed benefits before and I'm 37. I was only going to claim benefits until all my kids were in school. I thought that was what the welfare state was for – to support people in times of need."

Although the government and regulator the Financial Services Authority have urged lenders to practise forbearance where borrowers are struggling to meet monthly mortgage payments, Alliance & Leicester has refused to reconsider Copeland's case.

It says: "Ms Copeland has been placed in a position where she can no longer afford her mortgage repayments because of the cut in benefits from the government and changes in her circumstances. We have been working with Ms Copeland to provide her with time to try to find an alternative way to make up the shortfall in her mortgage repayments. We have specifically extended short-term forbearance measures in the immediate aftermath of the benefits reductions and continue to assess each and every case individually.

"Incepting litigation does not mean repossession will happen. In fact, over 80% of such customers rehabilitate. It is very common for customers in this circumstance to consider selling their property, and if they speak with our litigation department we will always work with them to find a mutually acceptable solution. Repossession is always a last resort for Santander."

Copeland has put her home on the market in an attempt to sell, but it still means she and her children will have to move into rented accommodation early next year. She is just one of many people who have contacted Shelter about cuts to SMI payments. They include:

■ Marcia and her husband and three children (aged seven, two and one) live in a three-bed house in Manchester and have an interest-only mortgage with Northern Rock costing £501 a month.

The SMI cuts meant the family lost 40% of their payments and now receive just £286.40 a month. They are trying to find a way of staying in the property to minimise disruption to their eldest child's schooling and are exploring the option of become tenants in the house under a mortgage-to-rent deal. The stress is exacerbating Marcia's husband's depression and, if the deal doesn't go through, the family face repossession.

■ Karen has multiple sclerosis. Her husband recently gave up work because Karen can no longer cope with looking after their two children, one who has muscular dystrophy. She receives disability living allowance. Their mortgage lender says that, because of the SMI cut, their monthly mortgage payments will jump from £180 to £400.

The family has been trying to prepare financially for the expected cuts. "We've spent the past 12 months trying to pay off our £2,000 overdraft and we've got it down to £400. We'd be facing financial ruin otherwise. But the money we put aside to get that overdraft down will now have to go towards the mortgage."

This leaves no financial flexibility: "We'll have to ask for help from the charities family fund if we want to buy anything for the house. We can't do anything on our own and if [the government] does anything else we're going to be sunk.

"We were professional working people and, because of our disabilities, our entire life has changed. My husband has had to give up work to be our son's carer because I couldn't cope, so we are totally at the mercy of the benefits system."

■ Jean is 44 and lives with her husband and three children aged 13, nine and five in the London borough of South Croydon. Her husband was a builder but had to stop work following a medical problem. Jean receives income support, disability premium and child tax credits. The household is £3,000 in arrears on their mortgage, but had reached an agreement with their lender and are paying off £20 a month on the debt.

Jean was receiving SMI to help pay her mortgage, but the changes mean she now has to find an extra £139 a month. This has pushed the family to the breadline.

"We can't earn because of my husband's disability so there's no extra money to be made. We're using money for food and the electric to pay the mortgage. I'd rather not eat than not pay the mortgage because we can't lose our home. Things are so bad that we're going begging to my mum and dad to help us out and they're living on a pension."

So are there political solutions? The government says that while the rate was set at the previous rate of 6.08%, some people were receiving more than they needed to pay their mortgage interest – a situation that was unaffordable for the exchequer and unfair to taxpayers.

In October, benefits minister Lord Freud called on lenders to come up with ways to ease the problems of people struggling to pay their mortgages, including the idea of a "bulk buy" interest rate equivalent to the rate of SMI for those claiming.

But the Council of Mortgage Lenders, the main trade body for lenders in the UK, has rejected this idea, saying that to charge all borrowers in arrears an average mortgage rate would be "in breach of the contractual agreements between individual borrowers and lenders, and could be challenged in the courts, probably successfully".

It added: "Even if it were possible to charge all borrowers in arrears a rate equivalent to SMI, lenders and borrowers would be left exposed to future arbitrary changes in benefit arrangements, like the 40% rate reduction announced by the chancellor in his emergency budget and implemented less than four months later."

The Council of Mortgage Lenders also claims there would be "a moral hazard in giving borrowers a signal that they do not have to comply with the contractual terms of their mortgage and will be compensated by the state for failing to do so, and that borrowers who do not qualify for state support and who struggle to meet their commitments would be cross-subsidising those who do not".

It says the best solution is to pay SMI at the rate applying to individual borrowers' mortgages, ensuring no over- or underpayments.

However, it added: "If the government is worried about the additional cost of this, it could consider a plan we have suggested before, namely making SMI payments a second charge on the property. This would enable the costs to be recovered when the borrower remortgages or sells the property. That could help justify making more borrowers eligible for SMI, and would be a fair way of balancing the interests of homeowners and taxpayers."

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http://www.guardian.co.uk/money/2010/dec/05/mortgage-benefit-cut-lose-homes

Poor things, lets give them some more money as that's the reason I pay my taxes, so people can get there mortgages paid for whilst i'm working my **** off whilst living with my parents!

I will say that I'm genuinly sorry for people who are ill!

Agree, get 'em repossessed, sharpish.

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The Council of Mortgage Lenders also claims there would be "a moral hazard in giving borrowers a signal that they do not have to comply with the contractual terms of their mortgage and will be compensated by the state for failing to do so, and that borrowers who do not qualify for state support and who struggle to meet their commitments would be cross-subsidising those who do not".

It says the best solution is to pay SMI at the rate applying to individual borrowers' mortgages, ensuring no over- or underpayments.

However, it added: "If the government is worried about the additional cost of this, it could consider a plan we have suggested before, namely making SMI payments a second charge on the property. This would enable the costs to be recovered when the borrower remortgages or sells the property. That could help justify making more borrowers eligible for SMI, and would be a fair way of balancing the interests of homeowners and taxpayers."

The Council of Mortgage Liars talking Moral Hazard and sense (re: making the entire cost of SMI a charge on the property)? :lol::lol::lol::o:unsure::ph34r:

Edited by rented

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The Council of Mortgage Liars talking Moral Hazard and sense (re: making the entire cost of SMI a charge on the property)? :lol::lol::lol::o:unsure::ph34r:

Now if SMI were a *first* charge on the property, it takes away the moral hazard of lining a lender's pocket.

Bailouts aside ...

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Plenty of work available in McDonalds, KFC, Costa Coffee, Asda etc when the SMI runs out for those who can work.

Edited by Money Spinner

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This story was also covered in the Sunday Times 'Money' supplement today. Although their angle was to warn potential BTL 'investors' about buying 1 bed flats - they say that hundreds of '000s of tenants won't qualify under the new rules. The article contains the classic para:

"Existing landlords will have to decide between swallowing a fall in renal income or potentially evicting tenants and facing costly void periods." Where's that picture of the tiny violin again?

Edit to add - the story covered was about the general reduction in HB - not specifically about the woman with MS etc. Their featured woman of the week was a BTL investor from Sheffield with 8 BLT properties.She's quoted as saying "It will be hard to accept lower rental payments but it could be better than having to deal with costly void periods."

She has 2 of her 7 tenants with rent paid via HB. Wonder how her empire will stack up when IRs increase?

Edited by newbonic

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"Your home may be repossessed if you do not keep up repayments on your mortgage"

While these situations are sad for the individuals involved there are (and always have been) private insurance schemes available to deal with loss of income. If you couldn't afford to protect your mortgage payments then you couldn't safely afford to take on the mortgage. There should be no taxpayer money available for those who chose to take on such a risky personal investment.

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This lady's testimony is missing some lines:

1 What happened to the ex-? Did he just disappear into thin air leaving 2 kids, and the Life Insurance didn't pay up? Or is he on £100K a year in the next town, not needing to support his wife and kids cos the state will?

2 How can she justify making a profit out of SMI???? Even if benefits are a kind of insurance, she shoudln't be making a profit out of them.

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The government will bail out these hard-working families. This government is no different than the previous government this is why repossessions are falling. There will be some new scheme next year to deal with the loss of SMI. The government can't allow mass repossessions as this will lead to price falls, and if house prices fall, the banks fall. They have already postponed the housing benefit cut for a year and they will find money for SMI2 ... maybe via QE2.

house reposessions are not going up because base rates have not gone up in a while, with each successive base rate rise there will be a little temporary blip up in reposessions, and this may continue for 5 years and more

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Insurance that covers loss of income/illness should be mandatory when taking out a mortgage. That way the tax payer wouldn't have to bail out the irresponsible.

I'm not sure how insurance works, but I assume that it only covers loss of income for a time period, a year maybe? People would NEED to find another job, anything at all, otherwise they would get cut off.

There are jobs out there for people that are willing to take them. Unfortunately the majority of the population thinks they are 'above' said jobs and would rather point the finger of irresponsibility at the government for making them homeless rather than themselves.

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...

There are jobs out there for people that are willing to take them. Unfortunately the majority of the population thinks they are 'above' said jobs and would rather point the finger of irresponsibility at the government for making them homeless rather than themselves.

Methinks you have been reading too much Daily Mail. Hopefully you can list some of these available jobs?

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Methinks you have been reading too much Daily Mail. Hopefully you can list some of these available jobs?

there you go, only took a minute to find, obviously to net off the benefit of working for yourself and having to resort to beancounting the salary would have to come in at the top end but they are clearly there :D

Job

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Shame they can't sell their house and rent - they'd get that paid on benefits...

The reason they don't sell to rent is that they know exactly how most landlords behave towards their tenants.

Edit to add:

If these people in receipt of SMI have been making a profit why the bloody hell haven't they been saving the excess for when the scheme ends? SMI was supposed to be a sort of "stay of execution" to allow homeowners a bit of breathing space while they sorted out their job / financial situation, not a free meal ticket for the rest of their lives.

Edited by Diver Dan

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Currently some people are making a profit from subsidies, some people are paying just 0.475% above base rate on their mortgages so making a 5% profit.

Also, the homes they move out of won't stay empty someone else will move in who probably equally needs somewhere to live, and they will pay the mortgage.

The title could have read Mortgage benefit cut that means thousands more homes will be available for people who want to buy.

The reality though is little will change, there are a fixed number of people in the country and a fixed number of houses. If you assume that all the houses are lived in, i.e. when someone's house is repossessed someone else will move in then the number of homeless people and overcrowded homes changes very little.

Edited by caparn

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Insurance that covers loss of income/illness should be mandatory when taking out a mortgage. That way the tax payer wouldn't have to bail out the irresponsible.

I'm not sure how insurance works, but I assume that it only covers loss of income for a time period, a year maybe? People would NEED to find another job, anything at all, otherwise they would get cut off.

There are jobs out there for people that are willing to take them. Unfortunately the majority of the population thinks they are 'above' said jobs and would rather point the finger of irresponsibility at the government for making them homeless rather than themselves.

The exact opposite is what the regulators have now stated. They say that the market was selling this Payment Protection Insurance at the time of sale of the product and therefore it wasn't fair ?!!?

So now PPI sellers aren't allowed to sell at the time the product is bought. It's insane. It encourages people to think, well it's not that important then after all is it? So they don't buy.

We are a nanny state that bails out the feckless idiots at the expense of the prudent. And then as in the OP they complain when they are getting 'free money' that it's still not enough. The f*cking cheek of it.

How about giving me money so I can buy a house rather than rent please. What do you mean there is no free money scheme for me as a renter?

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The exact opposite is what the regulators have now stated. They say that the market was selling this Payment Protection Insurance at the time of sale of the product and therefore it wasn't fair ?!!?

So now PPI sellers aren't allowed to sell at the time the product is bought. It's insane. It encourages people to think, well it's not that important then after all is it? So they don't buy.

We are a nanny state that bails out the feckless idiots at the expense of the prudent. And then as in the OP they complain when they are getting 'free money' that it's still not enough. The f*cking cheek of it.

How about giving me money so I can buy a house rather than rent please. What do you mean there is no free money scheme for me as a renter?

In the past all people taking out a high LTV mortgage had to pay an insurance one off premium on purchase that was to work in the lenders favour...so that if the property fell in value and the house was sold for less than the loan outstanding on it the bank could claim the difference from the insurance company...but the seller was still liable to pay back the full outstanding debt...the insurance company would chase them for it for several years. ;)

Edited by winkie

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In the past all people taking out a high LTV mortgage had to pay an insurance one off premium on purchase that was to work in the lenders favour...so that if the property fell in value and the house was sold for less than the loan outstanding on it the bank could claim the difference from the insurance company...but the seller was still liable to pay back the full outstanding debt...the insurance company would chase them for it for several years. ;)

Yes, they were saying the cover is actually protecting the lender so it's not fair to force it. Well look at in another way. If you don't buy it then we will increase the interest rate 1% to provide the same risk contingency. Lenders aren't a charity.

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I've grown weary of people hiding behind their children, or their illness or their disability. When will more people take responsibility for their own lives and make contingency plans for an unforeseen change in circumstance?

Going cap in hand to the tax payer should not be the default fall back position for people to maintain a certain lifestyle. If your life's changed through accident or illness and you haven't made plans why should you expect to keep your house? Should the government just pay your mortgage interest for the term? Would you also expect to keep your prestige car or continue to have your 3 foreign holidays each year with no employment?

These people need to live in the U.S then they'd realise how comparatively good they've got it.

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Plenty of work available in McDonalds, KFC, Costa Coffee, Asda etc when the SMI runs out for those who can work.

Except that there isn't.

I have a (professionally qualified) friend who has been out of work for 18 months.

As part of his "looking for work", as well as jobs within his qualification, he applies for every generically skilled menial job that comes along.

He's never even got as much as a reply!

tim

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Except that there isn't.

I have a (professionally qualified) friend who has been out of work for 18 months.

As part of his "looking for work", as well as jobs within his qualification, he applies for every generically skilled menial job that comes along.

He's never even got as much as a reply!

tim

Yep, as I have pointed out before, when a new coffee shop opened at Bluewater, there were 2,000 applications for jobs as waiting staff and over a third of these were from graduates.

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Amanda Copeland, a mother of three young children (see opposite), has been told by her lender, Alliance & Leicester (part of the Santander group), that it will start proceedings to repossess her home in January if she cannot find an extra £400 a month to make up the shortfall in her monthly mortgage interest payments following the SMI cuts.

She says: "I've never claimed benefits before and I'm 37. I was only going to claim benefits until all my kids were in school. I thought that was what the welfare state was for – to support people in times of need."

They are recycling that particular sob story from the BBC here in November. The woman gave up her nursing job fgs in order to claim benefits full time.

http://www.bbc.co.uk...siness-11743245 and HPC thread http://www.housepric...howtopic=154546

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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