There Is No Safety Net For Mortgage Holders Who Lose Their Jobs

[libspero]

+1

As soon as you lose you job your a no one on this board. doesn't matter how much tax you have paid over the decades.

I can't let that slide unchallenged.

There is a definite lack of sympathy for people who either game the system or have no interest in getting work (but then complain about their remittance from the tax payer).

There are several posters on this board who have lost their jobs over the years and have continued to receive the support of the forum. In their cases they have been actively trying to get back into employment, generally haven't complained about their lot in life, and haven't been up in arms claiming that the tax payer aught to give them more money.

[dalek]

Particle man, are you a renter? Do you want to buy your own place?

By the way, Steed, I'm not really taking all this personally (although as particle man said, I am getting so frustrated by the irrationality on this threat that I am resorting to calling people barmy!) as I'm sure I'll survive and am being positive.

But I do worry about all those other people in a situation similar to me who are in a worse position because of this cap on paying mortgage interest benefit - couples with children and the disabled. And yes, they are being hit by it. You only have to google this topic to find all the horrible cases of hardship because of it - much worse than what I'm going through.

Meanwhile, the MPs who decided this, and the multi-billionaire Lord Freud who instigated it, are still horribly tainted by the expenses scandal with their insatiable desire for belfast sinks, furniture from Oka and duck islands - they would have continued if they hadn't been rumbled. Plus their safe as houses pensions. Plus their second homes paid for by us (!).

Luckily, both the Citizens Advice Bureau and Shelter have put in reports to a government consultation on this, with horrendous case studies included, asking for the government to reconsider the cap. These are now being considered. Thank God HPCers weren't consulted or all unemployed would be on the streets, renters and homeowners!

Edited May 20, 2012 by dalek

[Executive Sadman]

You still don't get it, there is no more a safety for tenants than for owners.

Its worse than that.

If a homeowner doesnt make mortgage payments, he may get kicked out.

If a tenant doesnt make rent payments he (almost certainly) will be kicked out.

But also, if his landlord doesnt make mortgage payments, he again, almost certainly will be kicked out. This time through no fault of his own.

Supposedly, home ownership is about responsibility. If people cherish 'their' homes so much they can at least have a rainy day fund.

Homeowners discriminated against, give me a break. They're the only cohort afforded a completely tax free vehicle in which to build equity.

[dalek]

See you next Tuesday (sigh) said: 'You still don't get it, there is no more a safety for tenants than for owners.'

Again, renters in general (not those exceptions who lived with seven children in £2,000 a week Mayfair homes any more) get all their rent paid when they lose their jobs. Many many mortgage holders who lose their jobs, because of the 3.65% interest cap brought in in 2010 now have on average £200 arrears every month and face repossession. That, to me, reveals renters have a proper safety net. Why can't you get that?

[libspero]

See you next Tuesday (sigh) said: 'You still don't get it, there is no more a safety for tenants than for owners.'

Again, renters in general (not those exceptions who lived with seven children in £2,000 a week Mayfair homes any more) get all their rent paid when they lose their jobs. Many many mortgage holders who lose their jobs, because of the 3.65% interest cap brought in in 2010 now have on average £200 arrears every month and face repossession. That, to me, reveals renters have a proper safety net. Why can't you get that?

In a bid to try to be helpful (rather than take sides), you seem to have a significant amount of equity and there are some mortgage lenders offering interest rates of around 2.3% (+base).

Admittedly these are on repayment mortgages, but have you tried negotiating with your bank for different (variable rate) mortgage terms?

[dalek]

In a bid to try to be helpful (rather than take sides), you seem to have a significant amount of equity and there are some mortgage lenders offering interest rates of around 2.3% (+base).

Admittedly these are on repayment mortgages, but have you tried negotiating with your bank for different (variable rate) mortgage terms?

Thanks Libspero. Your post much appreciated amid this ocean of hatred towards homeowners. Unfortunately, as I am on a fixed rate (I thought I was being prudent at the time!) I will have to pay a penalty for leaving this deal of about £7,000, so it's impossible.

On top of that, despite the 'equity', because I have no job at present Cheltenham & Gloucester will not allow me to move to a different product on a lower rate. And no other lender wants to know for the same reason. Believe me, I have tried everything. The lenders have you by the balls in this situation, despite being 'told' by George Osborne when he announced the new cap, to give borrowers some leeway until they find another job.

Edited May 20, 2012 by dalek

[SNACR]

If you replaced the word home with Range Rover Sport and mortgage with hire purchase agreement there'd be no debate.

It's contemptible that someone on minimum wage as a shelf-stacker is forced, under threat of imprisonment, to effectively pay the mortgage on someone else's large detached house they would never have the chance of acquiring themselves.

SMI might be the least worst option over councils being overwhelmed with families they're obligated to house but for any contribution the state made to someone's mortgage it should have, at the very least, been a loan lodged as a charge against the property.

[Squeeky]

And see you next tuesday, it's not a free lunch I want - I have paid thousands in taxes and I'm now 53. I am as much entitled to a safety net as you renters.

So I assume you also see renters who have their full rent paid when they lose their jobs as a free lunch too? No, I didn't think so.

Mind you, I hope you're right about that judge!

Dalek, Sorry to hear about the work situation, but your position isn't that bad.

You have:

a property, 50% equity of 250k? and less than 100k mortgage.

You've got 2 years until you can draw down on private pension, another 15+ for state pension to kick in.

So you have a couple of choices.

1) Stay where you are, hope you get another job in time and prevent the bank from foreclosing.

a) if you don't find something in time, fall back to option 2.

2) Sell up and move

a) go on an effing nice holiday until private pensions kick in... there is no point in having capital if you never get to spend it.

rent somewhere and drop a tidy sum into investments (go and see a IFA and see if they can stop you loosing the lot/make some money etc..)

i) I think you can drop all your spare cash into your pension if you wanted... It also offsets against income earned in the financial year, so you may be able to claim tax back from when you were earning and get additional top up into your pension, which you can then draw in a few years once you are 55 or over! You can then claim all the benefits entitled to the renters if you choose in the mean time.

ii) You can pay to some landlords multiple years rent up front - if you are then eligible for HB, having spent all your capital on housing, I believe you can then claim HB, and get it paid to yourself.

iii) probably many other ways to divi things up, check with an IFA or three.

c) look to apply for social housing, any one can these days, but your priority will be low - its not free, but can be cheaper than the open market and you avoid less professional aspects of renting.

possibly many other options.... The only thing you probably can't do is stay in your current property with an outstanding mortgage that you can't service. So take a look at the other options and see it as an opportunity to do something you haven't been able to do for the last 14 years because you've been tied to the one flat.

[libspero]

Thanks Libspero. Your post much appreciated amid this ocean of hatred towards homeowners. Unfortunately, as I am on a fixed rate (I thought I was being prudent at the time!) I will have to pay a penalty for leaving this deal of about £7,000, so it's impossible.

On top of that, despite the 'equity', because I have no job at present Cheltenham & Gloucester will not allow me to move to a different product on a lower rate. And no other lender wants to know for the same reason. Believe me, I have tried everything. The lenders have you by the balls in this situation, despite being 'told' to give borrowers some leeway until they find another job.

I'm not sure about "ocean of hatred for home owners", you do seem to be effectively calling for all of us to make your interest payments for you!

That aside, you are down £200 a month based on the difference between SMI and your actual mortgage repayments? You don't have a "rainy day" fund by the sounds of it, so is there someone in your family who would be prepared to help you make the repayments until you can afford it again?

Alternatively, if you still have a large debt hanging over your head, and perhaps no immediate job prospects on the horizon could you sell the flat and move in with nearby family until you get yourself set up again? Not paying any rent or housing costs would protect your capital until you find work again..

[dalek]

Hi Squeeky. Thanks for the suggestions. I am clinging on to option 1 for now, while sending out tens of CVs - which will soon hit the 100 mark!

But putting equity into a pension not an option while still unemployed. It would be classed by JSA as 'deprivation of capital' and so you would no longer be eligible to then claim housing benefit. Government has us by the balls as well as the banks.

I am looking at moving back to Wales and buying a two up/two down with the equity, and hopefully get a job there - again, that could be problematic if I didn't get a job, as any future chance of benefits would be hit by 'deprivation of capital' clause again.

But it would still mean losing a home I love having lived here 14 years (surely even renters can identify with that!), leaving all my friends, and the end of any hopes of returning to the same job. Leaving behind my life in effect. Sad, really, but it may come to that (don't get the violins out!).

And yes, Libspero, I am calling for all of you to make your interest payments for me! JUST AS YOU PAY FOR ALL RENT TO BE PAID TO RENTERS WHO LOSE THEIR JOBS! (sorry to shout, but it needs saying over and over again)

And don't forget, I too was until January, one of you! And paying tax towards the Welfare State for 32 years! Although now all our tax goes straight to the banks...

Yes, shortfall just over £200. As to family, parents dead sadly and other members with their own lives to lead and no room for me and belongings. And I did have a 'rainy day' fund - so many implications about the 'fecklessness' of homeowners (sigh) - which got me through the first three months of unemployment and covered all the interest.

Edited May 20, 2012 by dalek

[homeless]

The mortgage would be on a house that got wet inside when it rained, that the wind whistled through, that got cold in winter, etc.

The car was definitely a toy of the rich.

The food and utilities were much higher relative to incomes than today.

The wife at home would have a lot of hard work to do. Though if she was really lucky she might have a forerunner of today's washing machines to help with the single most labour-intensive task.

why would it need to be a house that let in rain? that nonsense. infact it was a heck of a lot cheaper to get some guy, non health and safety restricted to sort your slates out. the wooden windows and no central heating was par for the course even for the rich. and everyone in my street had a car when i was a kid, and i lived in a rough council estate, they worked on these cars in the street, often pouring the oil down the drains.

food and utilities are more expensive now, in this group i would add council tax, which is a heck of a lot more than rates ever were on a average wage basis. council tax alone is about 10% of many peoples wages, you could have fed your family on that money.

and as you said the wife could stay at home, that alone proves it was a lot easier in the 70s, try doing that now.

i as a tight ass, that likes to find a bargain am finding it harder and harder to make things level out, simply because the costs i can do little about take over so much of my income, perhaps 70% of the wage packet is allready spent on fixed weekly costs that i cant even with shopping around for cheaper deals for electricity ect i cannot stop paying.

so i have about 30% which i can look to spend on how i please only, i bet this was a lot more in the 70s. and this is the whole problem we now face. no-one has nothing left after the fixed costs because everyone from the banks to the councils to the electricity companies have squeezed all they can from the public. we realy are slaves.

as i said to the wife, if i go out work all week and at the end of it i have nothing for myself i might as well sit on the dole, cause they seem to manage ok.

[gf3]

I'm not sure about "ocean of hatred for home owners", you do seem to be effectively calling for all of us to make your interest payments for you!

This is my point. You are talking about Your tax paying His mortgage. You have already forgotten the decades of tax he has paid as though it was nothing.

This was a thread I started ages ago

rob and bob lose their job

[The Ayatollah Buggeri]

I beleive a renter gets no housing benefits if he has savings more than 6K.

Which, related to my point in post #10, is yet another feature of a system that discourages self-sufficiency. What is the point of making provision to take care of yourself in the event of having a problem if you know that you won't get any state support, but those who made no such provision will?

[dalek]

Anyway, here's a post from consumer action group showing you how people worse off than me are faring with these cuts. Maybe this will melt those hearts on here hardened by their bitterness at not being able to buy a home themselves (though probably not!):

Re: SMI Mortgage Interest 50% Cut !

Hi, I am disabled father of two and husband who cares for my ill wife,I recieve DLA mobility and the lower care componant and ESA. I used to work two jobs and run a successfull business. I bought a house which is modest and was well within our means and unfortunately, due to bad luck have came out of work due to a back injury and my wife has also suffered a serious illness. I have been claiming SMI interest for just over a year. My mortgage rate is fixed at 6.29% untill july 2013. My interest payments are £950 per month which is similar to equivilant rents in the area. I was recieving £750 per month towards this and struggled to top up the other 200 per month. My new SMI payments are £104 per week(£450 per month)!!! ( i now will have to find £500 per month xtra)If I were renting paying the same amount £950 per month I would be getting an extra £800 per month in benefits!!!!! This is crazy...I thought this country wants to save money!!!!

http://www.consumeractiongroup.co.uk/forum/showthread.php?277298-SMI-Mortgage-Interest-50-Cut-!

Edited May 20, 2012 by dalek

[Bland Unsight]

Take your minds off a crash just for one moment. Look at the world. The banks now own the governments of the world and you are doing nothing about it except attacking fellow 'victims'. Get real. The worst is yet to come, and hardly any of you have any idea what's going to hit you. Renters too.

IMO you are wrong about this. I often think that it would be better if this site had been called house price madness, but it is what it is.

I think that many posters are primarily interested in the housing market because of the way that it has intruded into and loused up so many parts of the economy.

I sympathise with the fact that losing a job may mean that you have to leave your home and more importantly you may have to move away from your friends.

However, this financial support to home owners is being cut because as a nation we cannot afford it, and one of the reasons that we as a nation cannot afford to support distressed home owners as we may have done in the past is that in the past we were doing it with debt and we are approaching a point in time where taking on more and more debt is increasingly dangerous.

We are borrowing more just to stay where we are in terms of the provision of benefits. What is spent on paying mortgages can't be spent on other societal needs. Life is about choices.

When I look at the world I see that a crash is the least of our worries but that debt is the cause of our predicament.

Good luck.

[dalek]

Thanks for your commiserations and well wishes, chairman of the bored, but when you say: 'This financial support to home owners is being cut because as a nation we cannot afford it' then equally you should say the same to renters - we can't afford to pay their rent either when they lose their jobs. Which would be nonsense.

Why is it so hard to see this? And you are forgetting the other very important point I seem to keep having to make: once people are repossessed because of the arrears due to the 3.65% SMI cap, they will be forced to rent and in almost all cases, this will mean they get more or even double in housing benefit what they would have got if all their interest had been paid!!!!!!! (oh God...). So where's the cuts there?

And why is it that the cuts - which are having to be made because the government (both the previous one and the current) decided taxpayers' billions should go straight to the banks, who then continue to pay millions in bonuses with it to their 'top' people who caused the crisis in the first place - are only hitting the poorest and most vulnerable in society? Tell me that. Don't forget, Osborne has now lowered the tax for the super rich.

And lets face it, I and soon-to-be-millions of others are losing their jobs because of the cuts caused by the above in the first place!

And remember, none of you here are immune. I too thought I was...

Edited May 20, 2012 by dalek

[Redcellar]

This is my point. You are talking about Your tax paying His mortgage. You have already forgotten the decades of tax he has paid as though it was nothing.

This was a thread I started ages ago

rob and bob lose their job

You're getting confused with a bank account and the tax system. The money we all pay in is spent, we are running a deficit. When we pay taxes we aren't able to draw down on what each of us pays when we want it.

And that raises another significant point. This thread became what people 'wanted' rather than 'needed'. If you have an asset worth £100,000 then you don't need help but you might want it. The benefits systems has to focus on 'need' because there isn't an unlimited pool of money and our individual contributions aren't paid into a bank account to be used later.

The value where want becomes need (for renters) has been set by the government as £16,000. For mortgagees I can have much more than £16,000 as assets (my house) and also have the £16,000 cash/investments and still receive the payments. I agree that does not sound a fair system.

[happy_renting]

Happy renting said: 'A lot of homeowners resent HB being paid to unemployed people'

So that makes it ok to attack me, does it? I was never one of those homeowners when I had a job, and never will be. Everything's black and white to you lot, isn't it. Which is one reason I decided to butt out from HPC for a while. So many of you fail to see the bigger picture. Take your minds off a crash just for one moment. Look at the world. The banks now own the governments of the world and you are doing nothing about it except attacking fellow 'victims'. Get real. The worst is yet to come, and hardly any of you have any idea what's going to hit you. Renters too.

I don't see my post as an attack on you.

If you read the full text of my post you will see that I was pointing out that many owners who resent benefits being paid to other people will change their tune once they are out of work as well.

People seem to be under the impression that receivers of benefits live the high life, I doubt many do, not on £71 a week if you are unemployed (and the benefit is often LESS than that.).

There would be less need for benefits if wealth producers were not overtaxed to fund dependecy on government largesse in some areas. I do believe that a safety net for the poor and helpless is a vital in a civil society, and, bearing in mind the cost of fuel, food and housing, any reduction will take most people below subsistence level. Tens of thousands die of cold each year in the UK and it is an absoloute scandal.

We have thus got stuck in a vicious circle, which can only be solved if the very wealthy pay working people decent wages instead of skimming off so much in tax and profit. I refer to the growing gap between rich and poor over the past 2 decades. The top 1-5% have become too powerful and greedy.

But the longer term solution is creation of real jobs producing real products and services, not bankers skimming other people's wealth and paying politicians to keep them sweet.

Edited May 20, 2012 by happy_renting

[Loui]

As a renter if you lose your job you only get your rent paid (housing benefit) if you have less than £16000 in savings

You also only get contribution based JSA for 6 months if you have more than £16000

So

If I have £70000 in savings as a renter and I lose my job I do not get housing benefit but I do get contribution based JSA but for 6 months only.

If I have £70000 in equity in my house and no savings and I lose my job I also do not get housing benefit. I do get contribution based JSA but after 6 months I can also then claim income based JSA until I find work. I may also get some help with interest payments on my mortgage. If this help does not cover my mortgage and other expenses I can sell up and have the £70000 in the bank and revert to the same situation as the renter with £70000

It does seems to me that generally speaking a renter with £70000 in the bank gets less help from the state than a person with a mortgage who has £70000 of assets in their home. I can see the frustration of people who have owned and paid taxes for a number of years who cannot get help to see them through difficult times. But to suggest that renters get more help is not true. Times are hard for everyone. It's not your fault that your home has risen in value but the fact is that it has. If I lose my job tomorrow I have to start spending my savings (which I hope one day will allow me to buy a home). If a home owner with equity of £70000 loses their job why should they have their asset protected when the same does not apply to the saver?

[pathfinder]

The thing is were facing mass job losses, and i am seeing real wage deflation everywhere. Only way I worked out how to remove the savings barrier was to overpay like mad. If you want the money back out it is processed like a loan at the same rate as the mortgage. Tax credits do not consider a mortgage a bill, which is amusing.

Basically lending on 2 incomes assuming perpetual wage growth was madness.

[dalek]

Loui said: 'As a renter if you lose your job you only get your rent paid (housing benefit) if you have less than £16000 in savings

You also only get contribution based JSA for 6 months if you have more than £16000....If a home owner with equity of £70000 loses their job why should they have their asset protected when the same does not apply to the saver?'

Because it is their home! The roof over their heads. But I agree with you that the whole means-tested thing stinks. It equally isn't fair. However, in my case, I had no savings above three months' worth and so I am comparing my situation of facing immediate arrears and within months repossession to renters with no savings over that, who get all their rent paid. But I do imagine, though don't know, that most renters don't have savings over £16,000.

There are injustices and anomalies throughout this system. But as I keep saying, two or three, or four wrongs do not make a right.

[Loui]

Because it is their home!

Well lucky them!

The person with £70000 in the bank doesn't have a 'home' which is why they are saving like crazy! If they ever want the smallest chance doing so they need that £70000 in the bank just as much as the person who has the equity.

Why should one asset be protected and the other not?

[Venger]

But it would still mean losing a home I love having lived here 14 years (surely even renters can identify with that!), leaving all my friends, and the end of any hopes of returning to the same job. Leaving behind my life in effect. Sad, really, but it may come to that (don't get the violins out!).

As renters, best we get usually is 2 months notices when landlords want us out. Loads of posts here of people having to move out of homes they've settled into. Or landlords putting their properties up for sale and expecting tenants to show viewers around. Or lots of other hassle.

I don't think you've got much idea of the difficulties encountered by renters who've been long saving towards buying their own home, outpaced by HPI, when you're sitting there in a flat (WC1?) worth £250,000 with £150,000 equity. If you STR'd you'd still be in a better position than many renters here. And you could buy back in after the crash, unless you don't expect there to be one, seeing as you expect banks to listen to George Osborne and home owners to be comforted with lots of free taxpayer money so they can stay in their special homes.

Can't you downsize and buy something closer to where you are now, or rent, instead of this sob story about moving many miles away to Wales away from friends ect? I do hate home owners more and more. Clueless.

[gf3]

As a renter if you lose your job you only get your rent paid (housing benefit) if you have less than £16000 in savings

You also only get contribution based JSA for 6 months if you have more than £16000

So

If I have £70000 in savings as a renter and I lose my job I do not get housing benefit but I do get contribution based JSA but for 6 months only.

If I have £70000 in equity in my house and no savings and I lose my job I also do not get housing benefit. I do get contribution based JSA but after 6 months I can also then claim income based JSA until I find work. I may also get some help with interest payments on my mortgage. If this help does not cover my mortgage and other expenses I can sell up and have the £70000 in the bank and revert to the same situation as the renter with £70000

It does seems to me that generally speaking a renter with £70000 in the bank gets less help from the state than a person with a mortgage who has £70000 of assets in their home. I can see the frustration of people who have owned and paid taxes for a number of years who cannot get help to see them through difficult times. But to suggest that renters get more help is not true. Times are hard for everyone. It's not your fault that your home has risen in value but the fact is that it has. If I lose my job tomorrow I have to start spending my savings (which I hope one day will allow me to buy a home). If a home owner with equity of £70000 loses their job why should they have their asset protected when the same does not apply to the saver?

If we were going down the real fair route what should happen is.

when you lose your job your savings should be taken from you and the money placed in a bank account.

The interest on that money should help towards you HB and when you get a job your money should be returned.

Any equity in a house reduces the amount of SMI the government pays so this would be the equivalent.

Personally I think the £16,000 rule sucks I think £1,000 X age would be fairer.

[Bland Unsight]

Thanks for your commiserations and well wishes, chairman of the bored, but when you say: 'This financial support to home owners is being cut because as a nation we cannot afford it' then equally you should say the same to renters - we can't afford to pay their rent either when they lose their jobs. Which would be nonsense.

Why is it so hard to see this? And you are forgetting the other very important point I seem to keep having to make: once people are repossessed because of the arrears due to the 3.65% SMI cap, they will be forced to rent and in almost all cases, this will mean they get more or even double in housing benefit what they would have got if all their interest had been paid!!!!!!! (oh God...). So where's the cuts there?

And why is it that the cuts - which are having to be made because the government (both the previous one and the current) decided taxpayers' billions should go straight to the banks, who then continue to pay millions in bonuses with it to their 'top' people who caused the crisis in the first place - are only hitting the poorest and most vulnerable in society? Tell me that. Don't forget, Osborne has now lowered the tax for the super rich.

And lets face it, I and soon-to-be-millions of others are losing their jobs because of the cuts caused by the above in the first place!

And remember, none of you here are immune. I too thought I was...

I read the thread fairly carefully, and if I'm wrong about this I apologise, but isn't the point of a cap that the Treasury reckon that it will reduce the total spend. Hence someone sat down with the data and a spreadsheet and worked out that once you'd netted off the benefits paid to people who were less expensive after the cap (SMI to keep them in the homes would cost more than the HB paid out to cover their rent) against the people who were more expensive after the cap (SMI to keep them in their home less than the HB paid out to cover rent), the government makes a saving. That could be naively optimistic - OK it is naively optimistic, but it may also be true.

Equally, it is part of a broad spectrum of reforms via which the coalition is withdrawing indirect support to the financial sector and home owners. Right or wrong, IMO the Coalition is trying to reduce the bill for keeping people in their homes and isn't too bothered if this pulls down house prices. This cap is part of that policy. One way to read it is that they are refusing to support jumbo high-LTV interest only mortgages taken out at pre-2008 prices. Don't forget that IO is massive. It's bugger all comfort to you, but what you are experiencing may be collateral damage which follows from a policy choice aimed at other people, (pure speculation on my part).

As to putting billions into the banks. We made that choice already - New Labour decided that given the lack of a legal framework for resolution of insolvent banks it was either take our chances with wages not being paid, people not being able to draw out cash or buy food on debit cards or bail out the banks. Given that there was no legal framework to bail them out other than at arms length we are stuck with them paying themselves as if they haven't been bailed out. But don't suppose that we've seen the end of that story yet. There have been huge lay-offs at the banks and we are probably still only getting started.

You may be losing your job because of the cuts, but that just begs the question, why are there cuts? There are cuts, or certainly a reduction in the growth of deficit spending, because collectively we put the economy in a coma, and as individuals we did a lot of the damage borrowing money against houses and spending it on crap, and New Labour did the rest of the damage by pretending that we could afford public services and benefits that actually we couldn't afford. The banks chipped in by facilitating our idiocy and charging us for the service provided.