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Government Considering Key Change To Support For Mortgage Interest Benefit

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Article in the FT this evening saying that under new plans being considered by the Government, recipients of SMI would see the state recouping some of the funds claimed when the property concerned is either sold or the owner dies.

A Whitehall source told the FT that a decision on whether to enact this during the current parliament will be taken within the next few months.

"In the longer term, we intend to transform SMI from a benefit into a loan,” he said.

UK jobless face mortgage aid rethink

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"In the longer term, we intend to transform SMI from a benefit into a loan,” he said

A bit like student loans then.

It's quite possible to see people with outstanding tuition fee loans, mortgage loans and then government loans to pay the interest on the mortgage loans. That on top of Help to Buy of course.

Innovative.

No surprise that the Institute of Directors and even some bankers called the UK's current economic policy on house purchase mad and moronic.

Edited by billybong

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They should also be putting a charge on landlords BTL's if the tenant is receiving housing benefit. After all, it is still the taxpayer paying to buy someone else's asset/house.

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They should also be putting a charge on landlords BTL's if the tenant is receiving housing benefit. After all, it is still the taxpayer paying to buy someone else's asset/house.

Not sure how many landlords would want tenants claiming housing benefit though.

I have no issues with mortgage interest support being linked to realistic interest rates and ensuring no capital is repaid. However, making it a loan is yet another kick in the teeth for people who may need the safety net of this help after paying lots of taxes, but people who only ever receive housing benefit for rent will never have to repay anything.

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The oportunity for the "homeowner" to repurchase the equity under 1st charge by the treasury, will be there for them to repay the smi loan when they get back on their feet interest on the loan will be charged at market rates so as not to conflict with financial insurance companies

superb

also the treasury will have 1st charge on the property when sold or the owner passes away.

also all these recipients of smi must be getting their bank to switch them to interest only loans so they dont have to come up with the capital so theyre getting to stay in a nice house all paid for by DWP whereas those unemployed in private rentals have to have the bedroom tax applied and single room bedsit if under 35 etc so fairs fair.

this is superb really superb

Edited by workingpoor

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They should also be putting a charge on landlords BTL's if the tenant is receiving housing benefit. After all, it is still the taxpayer paying to buy someone else's asset/house.

The problem with that is where do you stop? All the benefits someone receives will be spent on goods and services.

The part the irks me about smi is that you get a fixed rate. If you have a better rate, you are allowed to pay off capital, so it is cash that goes straight into your pocket. In addition to keeping people in a house they can't afford allowing them to hide capital. If they sold they would probably get substantially less or no benefits whatsoever.

Whereas housing benefit is broken down in to bands, but the bands define the maximum you can receive and doesn't benefit you in any way if you find somewhere cheaper. You don't get to pocket the difference, so it doesn't encourage any downward pressure on rents by housing benefit recipients and sets a floor under the market. If you have too many bedrooms for your need you get 25% off whatever rent you are paying.

Perhaps if housing benefit worked the same way as SMI it might make the rental market work better.

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Why is the taxpayer paying anyone's mortgage interest?

Has the world gone totally nuts? The people running this country have not got a clue what damage they have done with all this.

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Why is the taxpayer paying anyone's mortgage interest?

Has the world gone totally nuts? The people running this country have not got a clue what damage they have done with all this.

Flat service charges are also paid for those in receipt of pension credit. As far as I recall from posts made by Democorruptcy, there's no upper limit to payments.

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There is no good reason to not scrap it tomorrow morning. In the long run it will cost more to administer the SMI scheme putting a charge on the property.

Ans what about negative equity??

The oportunity for the "homeowner" to repurchase the equity under 1st charge by the treasury, will be there for them to repay the smi loan when they get back on their feet interest on the loan will be charged at market rates so as not to conflict with financial insurance companies

Can't see the banks being too pleased with that. They normally get first helpings of everything.

On the other hand they might look at it as a price worth paying to encourage people to load up with more and more and more.......................debt - and after all it would be their cronies getting the 1st charge.

Probably the loans would be privatized in due course so the "1st charge to the treasury" would still end up being the 1st charge to the banks.

Edited by billybong

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The taxpayer is giving people interest free loans as deposits to buy houses, guaranteeing banks against loses on other purchases up to £600,000, so yes the world has gone nuts.

Have you noticed every government policy is to do with either property or cutting benefits for the unemployed poor.

It's as if they are trying to set up one group against the other.

Edited by billybong

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The taxpayer is giving people interest free loans as deposits to buy houses, guaranteeing banks against loses on other purchases up to £600,000, so yes the world has gone nuts.

Have you noticed every government policy is to do with either property or cutting benefits for the unemployed poor.

That's why they are known as The Nasty Party

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Long overdue.However,what happens if say I have a £20k mortgage and next door has a £120k mortgage.House worth £125k,,Once next door has had £5k SMI does it stop?,or does the debt simply grow and grow way above the worth of the house.?

Im not sure this has been worked out well at all.There will need to be some point where the SMI stops if there is no equity left or it becomes a farce.

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They should also be putting a charge on landlords BTL's if the tenant is receiving housing benefit. After all, it is still the taxpayer paying to buy someone else's asset/house.

But a benefit is just that, and it's payable to the tenant direct. As such it has nothing to do with the landlord.

If the LL seeks payment of the benefit to him direct, and the benefit was wrongfully claimed, the LL is on the hook to repay everything. Makes sense.

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No it's quite simple in its brilliance

The SMI paid to the "homeowner" is turned into a loan

(Not a gift)

The loan has to be repaid when the house is sold or the owner passes away (charge on property)

The option is there to repay what you've had from SMI with interest when you get back into work thus buying back your equity (clearing the charge from the property)

Also just having SMI like student loans they could build up a debt on the person claiming SMI which will have to be repaid either from future earnings or from benefits it could even pave the way for attatchment of earnings if the property sale doesn't cover the shortfall

Edited by workingpoor

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Half of all SMI claimants are pensioners. The loan on the house will be rolled up and the recovered from their property on death along with all the other costs that can be charged on property at death like care fees. It is great for saving the government cash but I do not quite understand why so many others on here are celebrating. It just means the inheritance goes to the state rather than passing down the generations. It means these peoples children are more likely to be renters and less likely to be homeowners so its the young not the old who will take the hit. It certainly will not lead to a flood of cheap houses coming onto the market. It is not redistributive since it ain't going to be impacting the likes of the Duke of Westminster. Its definitely not radical like a land value tax but then too many people on this board worry about pensioners living in semi detached houses and not enough about how land ownership in the UK is distributed overall.

Edited by stormymonday_2011

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Half of all SMI claimants are pensioners. The loan on the house will be rolled up and the recovered from their property on death along with all the other costs that can be charged on property at death like care fees. It is great for saving the government cash but I do not quite understand why so many others on here are celebrating. It just means the inheritance goes to the state not passing down the generations. It is not redistributive since it ain't going to be impacting the likes of the Duke of Westminster. Its certainly not an alternative to a land value tax but then too many people on this board worry about pensioners living in semi detached houses and not enough about how land ownership in the UK.

But inheritance keeps the property owning hpi dream going and it cancels out the "oh well my inheritance will clear my overborrowing debt off attitude"

A bit like banking on a lottery win

Edited by workingpoor

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The taxpayer is giving people interest free loans as deposits to buy houses, guaranteeing banks against loses on other purchases up to £600,000, so yes the world has gone nuts.

Have you noticed every government policy is to do with either property or cutting benefits for the unemployed poor.

Precisely.

The net result could be the taxpayer underwriting mortgage loans with taxpayers money and the giving them another loan to pay the interest if they can not keep up with the mortgage. I do not see how this change will make any difference to the affordability of property for other buyers. As mentioned above its main impact will be as an extra layer of charges on relatively small estates ( ie poorer people will now be paying higher rates of 'tax' on their estates at death than the rich.

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Precisely.

The net result could be the taxpayer underwriting mortgage loans with taxpayers money and the giving them another loan to pay the interest if they can not keep up with the mortgage. I do not see how this change will make any difference to the affordability of property for other buyers. As mentioned above its main impact will be as an extra layer of charges on relatively small estates ( ie poorer people will now be paying higher rates of 'tax' on their estates at death than the rich.

Not really if they pay the SMI back before selling or passing away there won't be a problem will there?

As it stands at the moment the taxpayer underwrites a mortgage and pays them for free if they cannot keep up with the mortgage.

Edited by workingpoor

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But inheritance keeps the property owning hpi dream going and it cancels out the "oh well my inheritance will clear my overborrowing debt off attitude"

A bit like banking on a lottery win

What's wrong with owning property or land. I think you will find David Cameron and George Osborne have done very well out of inheritance. In fact the British aristocracy have historically done a great job in handing landed wealth down the generations. Why is it acceptable for them but not the over borrowed masses. I am all putting a stop to people relying on mummy an daddy to see them right but let's apply the principle universally. A 100% inheritance tax with no gift allowance might be a start but a land value tax would be better.

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Not really if they pay the SMI back before selling or passing away there won't be a problem will there?

As it stands at the moment the taxpayer underwrites a mortgage and pays them for free if they cannot keep up with the mortgage.

Christ on a bike. People relying on Help To Buy and other gegaws probably can not afford a property in the first place at current prices so they wont be able to pay the f*cking SMI loan either if they get into trouble. There is no guarantee the property will cover the loans. Personally I don't care whether SMI stays or goes because in the big scheme of things it is trivial for the housing market and certainly less important in monetary terms than Housing Benefit which is a huge bloody subsidy from the taxpayer to the UK rentier class. This is just tinkering round the edge of the real issue which is who owns and controls the land in Britain

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Christ on a bike. People relying on Help To Buy and other gegaws probably can not afford a property in the first place at current prices so they wont be able to pay the f*cking SMI loan either if they get into trouble. There is no guarantee the property will cover the loans. Personally I don't care whether SMI stays or goes because in the big scheme of things it is trivial for the housing market and certainly less important in monetary terms than Housing Benefit which is a huge bloody subsidy from the taxpayer to the UK rentier class. This is just tinkering round the edge of the real issue which is who owns and controls the land in Britain

You think the fact that the benefits system pays the whole cost of buying into a leveraged investment doesn't affect the market value of that investment?

I think the whole point of HtB1, HtB2, SMI, LHA is that they increase house prices. That is the sole purpose of these land value subsidies. Now, if the recipients gain from these generous subsidies by way of the HPI they create, then it seems reasonable that some of that HPI gain is clawed back by the state.

LVT would be good, but first we need to remove the land value subsidies.

Edited by ingermany

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The taxpayer is giving people interest free loans as deposits to buy houses, guaranteeing banks against loses on other purchases up to £600,000, so yes the world has gone nuts.

Have you noticed every government policy is to do with either property or cutting benefits for the unemployed poor.

Help2Buy, mortgage interest benefit, zero interest rates, quantitative easing, taxpayer bailouts, funding for lending, central banks buying up toxic assets....etc etc...

No wonder the banks are so "profitable".

.... and still our politicians haven't figured out, the banks are bankrupting Britain. Total Stockholm syndrome.

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