Selective Mortgage Interest Benefit Cut Leads To Hardship

[Shotoflight]

Cuts to support for mortgage interest payments leave homeowners facing hardship

Citizens Advice says a third of homeowners seeking debt advice because of changes to the SMI benefit are vulnerable

http://www.guardian.co.uk/money/2012/feb/29/support-for-mortgage-interest-cuts

The government cut the interest rate at which SMI is calculated from 6.08% to 3.63% in October 2010. It said the high level meant 90% of claimants received more SMI than their mortgage was costing in interest, enabling some to use the excess to reduce their borrowing

The DWP is now consulting on the future structure of SMI, including putting a charge on properties belonging to SMI claimants after two years as a condition of ongoing support, extending a two-year limit on help to a bigger number of homeowners in receipt of jobseeker's allowance and ending direct payment of SMI to lenders.

A DWP spokesperson said: "Under the previous standard interest rate, more than 90% of people received more money than was needed to meet their interest payments and some claimants were able to pay off their capital too – this is not good use of public funds and is unfair to taxpayers, which is why we are consulting on how to provide mortgage support more efficiently in the future."

[The Knimbies who say No]

Cuts to support for mortgage interest payments leave homeowners facing hardship

Citizens Advice says a third of homeowners seeking debt advice because of changes to the SMI benefit are vulnerable

http://www.guardian.co.uk/money/2012/feb/29/support-for-mortgage-interest-cuts

The government cut the interest rate at which SMI is calculated from 6.08% to 3.63% in October 2010. It said the high level meant 90% of claimants received more SMI than their mortgage was costing in interest, enabling some to use the excess to reduce their borrowing

The DWP is now consulting on the future structure of SMI, including putting a charge on properties belonging to SMI claimants after two years as a condition of ongoing support, extending a two-year limit on help to a bigger number of homeowners in receipt of jobseeker's allowance and ending direct payment of SMI to lenders.

A DWP spokesperson said: "Under the previous standard interest rate, more than 90% of people received more money than was needed to meet their interest payments and some claimants were able to pay off their capital too – this is not good use of public funds and is unfair to taxpayers, which is why we are consulting on how to provide mortgage support more efficiently in the future."

The sooner this racket is ended, the better.

[leicestersq]

Gosh,

so if you stop giving people other people's money so that they can get a free house at the expense of others, it causes hardship on those getting a free house.

No concern from the Guardian for those having to work to give someone else a free house.

I bet these slave drivers at the Guardian in ancient times would have been horrified at the hardship enjoyed by the Pyramid Building Pharoah who had to pay for workers out of his own pocket after the slaves had escaped.

[Monkey]

WHAT!!!

SMI should be pulled all together, its unfair for people who are living within their means not receiving anything?

its just proping up the ponzi,

[Ascii]

WHAT!!!

SMI should be pulled all together, its unfair for people who are living within their means not receiving anything?

That's probably a bit harsh; bit of a knee jerk.

Long term I agree, but in the short term it is possible that someone will restart work very quickly and short aid is beneficial and less costly to the tax payer that way. All that said, I don't think short term aid is offered. From memory you had to cover it yourself for six months though could be wrong having never claimed in my life.

[interestrateripoff]

WHAT!!!

SMI should be pulled all together, its unfair for people who are living within their means not receiving anything?

its just proping up the ponzi,

It gets slightly more complicated than that especially for those with children. If you simply evict the council gets the responsibility rehouse, and as we have for those with large families if you get lucky you can do very nicely out of it and cost far more than paying the interest on their property.

The Labour govt was nuts in how they implemented this and gave out the money without actually looking at the individual cases and the interest they where being charged hence some people profited by getting the capital repaid.

This issue isn't just about keeping people in their home, more importantly it's about bailing out the banks via the back door. Keep people in their home for a bit is a nice unintended consequence of this banker bailout.

Forcing a firesale will ensure the bank has a loss.

[interestrateripoff]

That's probably a bit harsh; bit of a knee jerk.

Long term I agree, but in the short term it is possible that someone will restart work very quickly and short aid is beneficial and less costly to the tax payer that way. All that said, I don't think short term aid is offered. From memory you had to cover it yourself for six months though could be wrong having never claimed in my life.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/DG_180321

Changes to SMI

Changes to SMI rules have applied from 5 January 2009.

Different rules applied to SMI up to 5 January 2009. If you got help to make mortgage interest payments before this date, you will continue to get the same level of help.

Rules that apply to SMI since 5 January 2009

From 5 January 2009 if you were getting income-based Jobseekers Allowance, Income Support or income-related Employment and Support Allowance, most claims for SMI came under new rules including:

waiting 13 weeks from the date you claim before you get SMI (this is known as a waiting period and was previously 39 or 26 weeks)

being able to claim for mortgage interest on up to £200,000 of your mortgage (this was previously £100,000)

getting paid SMI for up to two years only if you are getting income-based Jobseeker’s Allowance

There is no limit to how long you can get SMI if you are getting:

Income Support

income-related Employment and Support Allowance

Pension Credit

[leicestersq]

It gets slightly more complicated than that especially for those with children. If you simply evict the council gets the responsibility rehouse, and as we have for those with large families if you get lucky you can do very nicely out of it and cost far more than paying the interest on their property.

The Labour govt was nuts in how they implemented this and gave out the money without actually looking at the individual cases and the interest they where being charged hence some people profited by getting the capital repaid.

This issue isn't just about keeping people in their home, more importantly it's about bailing out the banks via the back door. Keep people in their home for a bit is a nice unintended consequence of this banker bailout.

Forcing a firesale will ensure the bank has a loss.

So what. The taxpayer gains. The new home owner gains. Society gains from the application of moral hazard. The losers are those that deserve to lose.

[Democorruptcy]

http://www.citizensadvice.org.uk/index/contact_us/contactus.htm

[okaycuckoo]

This proposal is an extension - 2 years was the limit for those not in special risk categories, now SMI will be paid beyond that limit but on a secured basis.

We can assume that SMI will last as long as security is available. And gubmint being what it is, no real assessment of available security will be made because that would be an official recognition of the falling value of residential property.

And will they apply compound interest to the secured sums? My ass!

Just another subsidy to the banks, paid for by ordinary working people.

ps. Ending direct payment to lenders - another direct benefit to add to the dozens already existing, so either way it gets pissed up against the wall, the only question being whether the beneficiaries have been drinking champagne or beer.

Edited February 29, 2012 by okaycuckoo

[leicestersq]

This proposal is an extension - 2 years was the limit for those not in special risk categories, now SMI will be paid beyond that limit but on a secured basis.

We can assume that SMI will last as long as security is available. And gubmint being what it is, no real assessment of available security will be made because that would be an official recognition of the falling value of residential property.

And will they apply compound interest to the secured sums? My ass!

Just another subsidy to the banks, paid for by ordinary working people.

ps. Ending direct payment to lenders - another direct benefit to add to the dozens already existing, so either way it gets pissed up against the wall, the only question being whether the beneficiaries have been drinking champagne or beer.

Banks get subsidised, but the real gainers are those who get a free house.

[Monkey]

That's probably a bit harsh; bit of a knee jerk.

ok fair enough, but the people who have been given too much money and paid of capital should pay that proportion back - as said this benifit was to stop them from loosing their house, and not make money via the tax payer - this amount should not change regardless of house price drop. but in thei nvent of a rise in house prices the government gets more as a proportion (if the decide to sell their house)

look at it from my point of view. i was unable to get a mortgage on a property as what i could be lent and what i could buy were 2 completly different things. and i did not see merrit over streaching myself to get on the "ladder". the people who did get silly mortgages (high LTV, high income multiple, numerous MEWing, etc) are being rewarded for their risk, IE when the SHTF (they lost their job) they have managed to keep the property.

ok not all claimant will be in this situation, but i bet alot are.

if i took out a TAB with my Casino for £250k, and couldnt pay it back, would the government pay off the interest of that loan? no i'd have to declare myself bankrupt, affecting my future lending power for EVERYTHING.

90% of claiment didnt just get free money, they got free gains as well, which they will be benifiting for years to come.

yes i'm bitter, and envious, and annoyed. i'm annoyed at myself for trying to do the right thing and pay my own way, and do thing correctly. yes i ran up a big debt bill, but i paid it off. and because of that i'm suffering.

[long time lurking]

I don`t know the number`s but I would bet that if SMI was stopped and they were all repossessed they would then be in receitp of housing benefit ,I think the cost of that would be greater due to the low IR at the moment

If the above is correct it boils down to a choice between bailing out the mortgage debt or lining the pockets of the BTL sector,neither are ideal from a HPC point of view but IMO SMI is the lesser of two evils

[leicestersq]

I don`t know the number`s but I would bet that if SMI was stopped and they were all repossessed they would then be in receitp of housing benefit ,I think the cost of that would be greater due to the low IR at the moment

If the above is correct it boils down to a choice between bailing out the mortgage debt or lining the pockets of the BTL sector,neither are ideal from a HPC point of view but IMO SMI is the lesser of two evils

Yes, but the houses will become free for people in rented at the moment to buy. All that will happen is that people will swap houses, with those having saved getting better houses, and the taxpayer no longer having to finance this.

[iamdamosuzuki]

Fair enough, but what the hell is different about taxpayers paying BTL'ers mortgage. Intersest, capital and a nice profit on a speculative investment.

FTW. Britain is crazy.

[gf3]

Shouldn't home owners have all the work needed on their house done for free like people on housing benefit?

[AC44]

this country is gone wrong..

So if you are a renter (poor sod) nobody cares about you, while if you have a house you get support!!!

talk about double standards.

In the end why are we supporting people who made a wrong choice in their life? Why?

Am i stupid when I can see I cant buy with these prices?

This is just insane.

[South Lorne]

....and ending direct payment of SMI to lenders.

...lenders should be concerned ...will trigger more repossessions....don't understand this move...

[South Lorne]

...How many of the people who receive SMI (majority are retired) do not have any cash in their bank accounts but have money hidden in accounts operated by their kids?....

...have there been any reported cases...?....

[Monkey]

SMI for a year is fine as people can have problems and lose their jobs, be ill etc but then they should be made to review their expenditure and make the necessary adjustments and if that includes selling the gas guzzling car and property investment then so be it.

exactly, when my G/F lost her job, we took the decission to reduce our out goings. we have been forced to move out (LL selling up). we was going to move anywaydue to not wanting to spent this much on rent from one wage, we have made a consious decission to rent a property which is at least 25% cheaper in rent (i want 40% reduction), Thus smaller, thus other bills cheaper, this a fair reduction in our out goings. we are going to have to live off my wage only. it will be a struggle, but its what we have to do to be able to live.

when she does find work, then 100% of her wage will go into savings, and the pressure if off her to have to be earing a certian wage, which in this employement market is a good thing.

[South Lorne]

exactly, when my G/F lost her job, we took the decission to reduce our out goings. we have been forced to move out (LL selling up). we was going to move anywaydue to not wanting to spent this much on rent from one wage, we have made a consious decission to rent a property which is at least 25% cheaper in rent (i want 40% reduction), Thus smaller, thus other bills cheaper, this a fair reduction in our out goings. we are going to have to live off my wage only. it will be a struggle, but its what we have to do to be able to live.

when she does find work, then 100% of her wage will go into savings, and the pressure if off her to have to be earing a certian wage, which in this employement market is a good thing.

...you should be an economic adviser to the Labour Party to show them how it works in practice....

[markyh]

exactly, when my G/F lost her job, we took the decission to reduce our out goings. we have been forced to move out (LL selling up). we was going to move anywaydue to not wanting to spent this much on rent from one wage, we have made a consious decission to rent a property which is at least 25% cheaper in rent (i want 40% reduction), Thus smaller, thus other bills cheaper, this a fair reduction in our out goings. we are going to have to live off my wage only. it will be a struggle, but its what we have to do to be able to live.

when she does find work, then 100% of her wage will go into savings, and the pressure if off her to have to be earing a certian wage, which in this employement market is a good thing.

You must either be very hansome or your G/F very ugly!! I'm my experience attractive women when faced with this situation soon move on to find a more affluent boyfriend, because it's "not working" anymore.

Natural Selection, they can't help themselves, nature drives them to men that offer financial security and comfort. Watch out, that's how my wife found me! It was amazing when I was a single 30 something having a good job, nice car and being a home owner when property was being pushed out of the reach of other Alpha males who hadn't gotten all their financial ducks in a row!

Women aint daft. first sign is weight loss when you have not moaned about them putting on weight, she will be "prepping" while you are paying!

M