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


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Anyone losing their jobs in the months to come can have no idea what is going to hit them. Dole (JSA) for a single person is just £71 a week - for food, other groceries (toothpaste, loo rolls, washing up liquid etc), gas, electric, water and building insurance, never mind contents insurance (lets hope they're not burgled), phone, broadband etc.

But, on top of that, while unemployed mortgagees with interest rates below 3.65% will get all of interest paid by JSA, those with higher rates (most people), will find they have an average shortfall of £200 a month, meaning they will immediately start going into arrears every month and will after four to five months face legal proceedings for repossession.

Apart from the inequity of some mortgage holders being fine and others in dire straits, the crazy thing is that once repossessed, those with higher rates will have to go into private rented sector, where JSA will cover all their rent, which in most cases will be more than the amount they'd have received if all their interest had been met - i.e., with no 3.65% cap. How short-sighted is that?

So in addition to having the shock of suddenly having to live on £71 a week, they face arrears, loss of good credit rating - making life harder once they find, or if they find, another job - and repossession. And before everyone jumps on me - paying interest does not mean the JSA is paying for your asset. It is simply keeping the roof over your head, just like paying peoples' rent - which, lets face it, just goes to the evil BTL brigade's pockets. Paying the repayment part of the mortgage would obviously be wrong. As to baying HPCers who cry: 'Well you should have got mortgage protection!' - that was hardly an option when MPI has been so discredited, with the consequent hits to the banks who missold policies

Couples, with children and otherwise, are also being hit by this, despite slightly higher weekly JSA. As are those on disability benefits.

In other words, if you have a mortgage, and lose your job thanks to the current and previous government and the banks there is no safety net, no matter how much you paid in taxes over the years.

Edited by dalek
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The saftey net is that you can ask your lender for a repayment holiday, that you should have savings to cover 3 months living costs(which would include mortage payments).

You can't start paying mortage interest for unemployed JSA claimants, or you could have a single person in a city apartment claiming far more in interest payments than they would be entitled to in housing benefit.

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In other words, if you have a mortgage, and lose your job thanks to the current and previous government and the banks there is no safety net, no matter how much you paid in taxes over the years.

I believe that the part of the problem that you are overlooking is savings.

Before taking out a massive debt that would be impossible to service during a period of unemployment in addition to a deposit a prospective borrower should have enough additional savings to carry them through a period of unemployment. Seeing as it is plainly ridiculous to suppose that during a 25-year mortgage term there will not be a period of unemployment it's a bit daft to enter into a mortgage which blows up if you lose your job.

What the government are trying to say to the electorate via this policy is:

"This party's over

The bells are ringing themselves"

The principle of paying the interest echoes this - interest rates can spike but the repayment part is stable so you can always be sure that you have enough savings on hand to take you through say 3 months of unemployment.

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that you have enough savings on hand to take you through say 3 months of unemployment.

though the 3 month rule regard savings is a bit of a joke if your renting or mortaged, because the run on benefits do not cover the transition period between starting employment and getting paid until your claim hits 26 weeks, then you can get CTB and HB plus a one off £100 payment too see you through to you first wage packet.

So really should be advised 6 months savings, but the savings limit comes in for income based claims, so if your income is over £13k a year then its not possible to get the full help.

But thats really the idea of the welfare system, to support those in need, not those who want their lifestyle to continue despite being reckless with regard to borrowing and saving.

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Guess they should have bought insurance for this then, shouldnt they. Or at least set some money aside.

No sympathy from me. Thousands get evicted by landlords every year, no one crys for them. Private home ownership is supposed to be about responsibility.

If theyve got equity, they should rent/downsize. It what my folks had to do in the 90s. It not going to kill them. Might hurt their pride a bit, but thats probably no bad thing.

I guess the JSA is a bit odd. Most other countries seem to have a system where it bears some resemblance to past earnings, but hey ho.

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...the crazy thing is that once repossessed, those with higher rates will have to go into private rented sector, where JSA will cover all their rent,...

It's not JSA, but Housing Benefit that helps with paying rent and in many cases it will not cover all the rent. Even before the coalition's ill-considered cuts, 48% of Private Rental Sector recipients had to make up a shortfall.

'House of Commons Written Answers 10 November 2010':

http://services.parl...rs/part012.html

Steve Webb: In August 2009, 48% of those receiving housing benefit under the local housing allowance arrangements had a shortfall in their rent caused by the customer's contractual rent being higher than the appropriate local housing allowance rate.
Edited by CrashConnoisseur
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In other words, if you have a mortgage, and lose your job thanks to the current and previous government and the banks there is no safety net, no matter how much you paid in taxes over the years.

IIRC, you can claim the benefit sooner (SMI) than before the crunch. 13 weeks compared to pre-crunch rules of between 26-39 weeks.

No matter how much you've paid into the system? It's not a personal savings fund, there to lavish you back with whatever you've paid in taxes. JSA is low to cover the very basics, and better encourage people into taking a job. Not sat back relaxing without, although I accept many claimants do that when they also get their rent paid in full + NI + medical and other stuff.

I'm not interested in the woes of mortgage debtors who own property struggling to pay their mortgages, and other people thinking it's so unfair. Sell if you can't afford it. They took out the mortgage, so pay it.

Edited by Venger
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Please start with the simple question: why is the state involved in these transactions?

The most needy must be helped, but when the state steps in it complicates the definition of neediness until service of the needy becomes a justification for state borrowing ... oh, I give up.

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It's not JSA, but Housing Benefit that helps with paying rent and in many cases it will not cover all the rent. Even before the coalition's ill-considered cuts, 48% of Private Rental Sector recipients had to make up a shortfall.

'House of Commons Written Answers 10 November 2010':

http://services.parl...rs/part012.html

link is dead, but is that all HB claimant, not just the unemployed ones, know plenty of people that work to different extents and claim HB.

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Not meaning to launch an ad hominem attack on the OP, but the implicit assumptions in his or her post shine an unintentional light on the big, underlying problem we face.

The most important of those implicit assumptions is that buying a home should be a risk-free and largely obligation-free undertaking, because if any risks materialise or obligations become difficult to fulfil, the government should step in and take the problem off your hands. This mindset is exactly what Labour sought to promote in inventing the system whereby the taxpayer foots the bill for the mortgage interest of the unemployed in the first place. As others have pointed out, the alternative is make your own contingency plans, e.g. saving enough to get you through a period of unemployment, insuring your mortgage payments against job loss, and living within in a buffer built into your means that can absorb shocks such as IR rises, rather than spending every last penny you earn.

In fairness, the tax burden faced by the average worker is now so great that saving and living within your means is much more easily said than done. In the long term, we need lower taxes and smaller government, leaving enough in your pocket each month to save that safety buffer, but at the same time no DSS paying your mortgage if you fail to do so.

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It's not JSA, but Housing Benefit that helps with paying rent and in many cases it will not cover all the rent. Even before the coalition's ill-considered cuts, 48% of Private Rental Sector recipients had to make up a shortfall.

'House of Commons Written Answers 10 November 2010':

http://services.parl...rs/part012.html

This presumably means that 48% of the claimants lived in a property that was either too large for their needs, or cost more than the median property of the right size in their area would?

Edited by MongerOfDoom
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Honestly in this Orwellian new world we live in, the wages of the average person are so low they cannot realistically afford the costs of home ownership. Let alone at these prices.

Its unimaginable now but in the 70's your average guy working an average job could pay for his mortgage, car, utilities, food, wife at home, property taxes, 1 family trip a year and so on.. and still have enough to save 20% of his income for a rainy day.

A banker friend told me once they really only want government employees to give mortgages to, because only they make enough money and have the job security to lend to. Anda few people in the private economy who have big capital that they are willing to post as collateral.

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Honestly in this Orwellian new world we live in, the wages of the average person are so low they cannot realistically afford the costs of home ownership. Let alone at these prices.

Its unimaginable now but in the 70's your average guy working an average job could pay for his mortgage, car, utilities, food, wife at home, property taxes, 1 family trip a year and so on.. and still have enough to save 20% of his income for a rainy day.

A banker friend told me once they really only want government employees to give mortgages to, because only they make enough money and have the job security to lend to. Anda few people in the private economy who have big capital that they are willing to post as collateral.

This is the core issue. In an era of big government and high taxes there is public / private sector apartheid.

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I agree with the op. The house owner is discriminated against compared to the renter when it comes to the benefit system.

But all these threads end up in the same place lets have a citizens wage and get rid of HB and SMI.

I am hoping in the next two years to be in a position to pay my mortgage off but I will still have to pay tax to cover other peoples HB.

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I agree with the op. The house owner is discriminated against compared to the renter when it comes to the benefit system.

But all these threads end up in the same place lets have a citizens wage and get rid of HB and SMI.

I am hoping in the next two years to be in a position to pay my mortgage off but I will still have to pay tax to cover other peoples HB.

:lol:

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Anyone losing their jobs in the months to come can have no idea what is going to hit them. Dole (JSA) for a single person is just £71 a week - for food, other groceries (toothpaste, loo rolls, washing up liquid etc), gas, electric, water and building insurance, never mind contents insurance (lets hope they're not burgled), phone, broadband etc.

But, on top of that, while unemployed mortgagees with interest rates below 3.65% will get all of interest paid by JSA, those with higher rates (most people), will find they have an average shortfall of £200 a month, meaning they will immediately start going into arrears every month and will after four to five months face legal proceedings for repossession.

Apart from the inequity of some mortgage holders being fine and others in dire straits, the crazy thing is that once repossessed, those with higher rates will have to go into private rented sector, where JSA will cover all their rent, which in most cases will be more than the amount they'd have received if all their interest had been met - i.e., with no 3.65% cap. How short-sighted is that?

So in addition to having the shock of suddenly having to live on £71 a week, they face arrears, loss of good credit rating - making life harder once they find, or if they find, another job - and repossession. And before everyone jumps on me - paying interest does not mean the JSA is paying for your asset. It is simply keeping the roof over your head, just like paying peoples' rent - which, lets face it, just goes to the evil BTL brigade's pockets. Paying the repayment part of the mortgage would obviously be wrong. As to baying HPCers who cry: 'Well you should have got mortgage protection!' - that was hardly an option when MPI has been so discredited, with the consequent hits to the banks who missold policies

Couples, with children and otherwise, are also being hit by this, despite slightly higher weekly JSA. As are those on disability benefits.

In other words, if you have a mortgage, and lose your job thanks to the current and previous government and the banks there is no safety net, no matter how much you paid in taxes over the years.

but your wrong.... MOST people have low interest rates, and average UK household debt including mortgage is 55k. Most people are covered. Its only the minority people who bought at the peak or overpaid that arent covered, but thats just 5->20% of the population

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

Guess this is a much bigger problem for single people.

Well yes

The idea of leaving the family home and moving into a bedsit when young could be seen as a bit of an adventure with the rest of your working life to move on.

The idea of moving into a bedsit after over 30 years of paying tax's and knowing that is where you are going to spend the rest of your days is rather depressing.

But maybe I can't see past my VI status.

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but your wrong.... MOST people have low interest rates, and average UK household debt including mortgage is 55k. Most people are covered. Its only the minority people who bought at the peak or overpaid that arent covered, but thats just 5->20% of the population

Don't understand what you are saying here. The average Interest is supposed to be 3.63% and the SMI only covers that and it doesn't matter if you owe £55,000 or £200'000 you are covered the same.

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but your wrong.... MOST people have low interest rates, and average UK household debt including mortgage is 55k. Most people are covered. Its only the minority people who bought at the peak or overpaid that arent covered, but thats just 5->20% of the population

1. Your mortgage rate will change if you go into arrears...then theres the £20 per letter telling you every month you are in arrears.

2. New mortgages since 2006 have been around £140K average....these later mortgages are far more likely to have a serious problem due the "stretch", the lack of insurance, and everything else that was postponed to "get on with their lives".

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Well yes

The idea of leaving the family home and moving into a bedsit when young could be seen as a bit of an adventure with the rest of your working life to move on.

The idea of moving into a bedsit after over 30 years of paying tax's and knowing that is where you are going to spend the rest of your days is rather depressing.

But maybe I can't see past my VI status.

The point being that single living has generally been unaffordable for most people up until around 30 years ago. Even when I was younger I couldn't afford / didn't want to spend the money to live alone with one exception that was (i) in the USA and (ii) being paid for by my employer.

Most families these days will have two earners, and when one loses their job the other is likely to be able to claim higher tax credits, etc.

Basically single people who buy on a mortgage are taking a much bigger risk. They need to have plans to mitigate that risk, or suffer the consequences. In a market with no capital appreciation in property, I can forsee banks shying away from issuing mortgages to singletons unless they have bigger deposits, insurance that runs for longer, etc.

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