Government Considering Key Change To Support For Mortgage Interest Benefit

[spyguy]

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.

No, SMI *is* important.

£400M a year at a time of low IRs is a lot of mortgages.

There's about 50,000 sales a month at the moment.

Propping up 239,000 mortgage holders is keeping about 6 months stock off the market.

[R K]

The govt. are intent in turning socail welfare into debt.

It's the same principle Germany has implemented in Greece.

It'll have the same consequences.

Fools.

Edited December 30, 2013 by R K

[koala_bear]

No, SMI *is* important.

£400M a year at a time of low IRs is a lot of mortgages.

There's about 50,000 sales a month at the moment.

Propping up 239,000 mortgage holders is keeping about 6 months stock off the market.

At last some one puts it in perspective.

Is the sudden rush to put SMI on a firmer footing a sign they are preparing for IRs to start going up?

[R K]

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.

Yup.

More land for the Toryocracy.

Edited December 30, 2013 by R K

[Bloo Loo]

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.

there is no inheritance if the bills are paid as they become due...why should therefore, a benefit that time shifts the payment to asset sale be at the advantage of the inheritance..?

They are either paying their way at the time or the Government time shifts the payments to keep the person in their home..niether method should benefit the ultimate Estate of the Individual.

SMI at the moment, benefits that Estate greatly.

[Monkey]

will the government pay the interest on a loan for a Ferrari 458?

so I'd have to sell the Ferrari, and hope that the sale would pay back the outstanding loan.

so then why should they pay for the interest on a house that the borrowers can no longer afford, and keep them with the asset? sell the house, release the equity and move to a house you can afford, either by mortgaging again or renting.

buying a house is a luxury, there are many ways you can have a home.

paying the interest on any loan, only means the borrower benefits. but turning the SMI into a loan is a good thing. they have a choice, they chose to get FREE money to stay in their house. sell up and downsize your borrowings.

[awaytogo]

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

i cannot see why there should not be some repayment to the government when a property is sold.

[giesahoose]

Do you remember back in the day people bought insurance to pay their mortgage for a while if they lost their job. Then if they didn't get another job or couldn't pay the same amount in future they would sell the house and move to somewhere that was now within their means.

I didn't personally see a problem with things working this way. Seemed a lot simpler and fairer.

The govt should NOT be paying for someones mortgage.

[dances with sheeple]

Do you remember back in the day people bought insurance to pay their mortgage for a while if they lost their job. Then if they didn't get another job or couldn't pay the same amount in future they would sell the house and move to somewhere that was now within their means.

I didn't personally see a problem with things working this way. Seemed a lot simpler and fairer.

The govt should NOT be paying for someones mortgage.

Yes, I agree with everything you said, the present system just screams out how the banks and VI`s controlled the property game for their own benefit, and now are the one`s who will take the hit if defaults get rolling. If this is seriously being considered I am assuming rates are going up, and the banks are strong enough to trade through?

[spyguy]

At last some one puts it in perspective.

Is the sudden rush to put SMI on a firmer footing a sign they are preparing for IRs to start going up?

On a pure, personal speculation level, I think they might be worried about the yields going up and are trying to reduce gov spending as much as possible.

Stopping SMI carries less political flack than stuff like free bus passes + fuel subs.

[Bloo Loo]

Do you remember back in the day people bought insurance to pay their mortgage for a while if they lost their job. Then if they didn't get another job or couldn't pay the same amount in future they would sell the house and move to somewhere that was now within their means.

I didn't personally see a problem with things working this way. Seemed a lot simpler and fairer.

The govt should NOT be paying for someones mortgage.

people at the top of the market borrowing to the hilt with IO and teaser rates tend not to have the odd £100 per month extra for insurance. THAT would have put their ability to pay down by around £50,000. (2.4% IO)

[dalek]

But like all these things (capital gains on property sales by overseas speculators for example) it is unlikely to be back dated and will probably not come into force for a few years, so basically just words to attack all these benefit scroungers. Should be done NOW but they will not want a fuss before the election.

So you think you could never lose your job? Most people claiming benefits - and I was one of them not that long ago - have worked for decades and paid tax. And many, thanks to this albeit dwindling safety net, go on to find work again, as I did.

And giesahoose - the government does not pay people's mortgage! SMI pays towards the interest part only, not the repayment and because SMI is now capped, most people only get half their monthly interest paid. In addition, you get nothing for the first three months after you lose your job.

Edited December 30, 2013 by dalek

[Bloo Loo]

So you think you could never lose your job? Most people claiming benefits - and I was one of them not that long ago - have worked for decades and paid tax. And many, thanks to this albeit dwindling safety net, go on to find work again, as I did.

And giesahoose - the government does not pay people's mortgage! SMI pays towards the interest part only, not the repayment and because SMI is now capped, most people only get half their monthly interest paid. In addition, you get nothing for the first three months after you lose your job.

so, what is SMI for?...to keep you in the Wealth you have attained?..or could you have sold your asset and restarted?...what Policy is voted for to keep investors in their investment when they fail to meet the demands of the payment...and lets add in forebearance, another part of the Policy to keep you in your home..indeed, why not just have forebearance...there is no need for Government cash to keep you homed at all.

Indeed, why not just stop paying altogether if the Government and forebearance are key planks in keeping you in your home? where is the incentive to A: lend properly and B: borrow properly.?

[Democorruptcy]

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.

For example £130 state pension and a £1,000,000 a week service charge.

Pension credit is £145.40 so a pensioner can claim £15.40 pension top-up and the service charge is paid in full according to this government pension credit calculator. Of course in reality £1m a week might be visible on the radar but plenty of scope for builders to take taxpayer pounds at lower amounts

Based on the information you have filled in today, you may be entitled to a Pension Credit payment of £1,000,015.40 per week.

This is based on the following information:

You have savings of

£0.00

Are you the only person who lives in your household?

Yes

You have housing costs of

£1,000,000.00 per week

State Pension

£130.00 per week

https://www.gov.uk/pension-credit-calculator

.

[winkie]

i cannot see why there should not be some repayment to the government when a property is sold.

I agree, in normal circumstances they would be reposessed and any equity would have to be used towards private rent,the same as what most working people do when they do not own.......anyway anyone with savings would have to almost spend every penny before they could claim housing benefits........how fair is it that a house is doubling twice as much as the SMI that is used to cover the interest and all the benefits of high HPI goes to the claimant and not repaid to the tax payers when sold.......what is needed is more low cost social housing for people who can't pay a mortgage or rent.

Edited December 30, 2013 by winkie

[goldbug9999]

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.

Personally I think inheritance tax should be 100%, otherwise you get exactly the sort of feudal rentierism we have now.

It means these peoples children are more likely to be renters and less likely to be homeowners

Id rather create opportunities for home ownership via cheap housing than by multi-generational wealth accumulation.

[(Blizzard)]

So you think you could never lose your job? Most people claiming benefits - and I was one of them not that long ago - have worked for decades and paid tax. And many, thanks to this albeit dwindling safety net, go on to find work again, as I did.

And giesahoose - the government does not pay people's mortgage! SMI pays towards the interest part only, not the repayment and because SMI is now capped, most people only get half their monthly interest paid. In addition, you get nothing for the first three months after you lose your job.

If I become unemployed, will the government pay the financing costs on my investments? No.

If a home isn't an investment, if it is a protected right of some kind, then where's mine?

[Sibley's Love Child]

Do you remember back in the day people bought insurance to pay their mortgage for a while if they lost their job. Then if they didn't get another job or couldn't pay the same amount in future they would sell the house and move to somewhere that was now within their means.

I didn't personally see a problem with things working this way. Seemed a lot simpler and fairer.

The govt should NOT be paying for someones mortgage.

Exactly.

Haven't got mortgage protection insurance? You can go whistle Dixie.

As a previous poster mentioned half of all SMI recipients are pensioners, who presumably won't be in any hurry or able to secure paid employment in order to repay the remaining principal.

Got to keep those distressed props off the market somehow. Can't have our number one asset class devalued.

[hirop]

SMI should be time limited and then you're on your own. You should get nothing for the first 3 months so as not to totally abdicate personal responsibility to have some savings n place. Then it should provide support for a limited time period, say 12 months (but why not just 6?). It should only apply to a residential mortgage and at your registered address, i.e. BTL excluded, multiple mortgages...tough shit. I can't really argue with the idea that some support is available, as being forced to sell up before you have an opportunity to remedy your personal situation is harsh as long as you are going to remedy your own personal situation. I don;t know how the admin side of things works, but surely the banks could only claim what is due rather than this broad sweep fixed percentage approach. no problem with what help is provided being recovered at a later date. Maybe HB should be recovered also when a person enters work with a higher tax code for a long slow clawback??

Thinking about it, maybe banks would have less forbearance knowing that the SMI first charge goes in front of their claim. then again, maybe the government of the day will be happy to extend SMI knowing they are going to get it back. Could go either way I suppose.

[mrtickle]

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.

Far too many inherited properties are turned into BTL by greedy relatives who already own, instead of selling up and splitting the money. This will force them to sell, bringing more properties onto the market therefore a good thing.

[MARTINX9]

For example £130 state pension and a £1,000,000 a week service charge.

Pension credit is £145.40 so a pensioner can claim £15.40 pension top-up and the service charge is paid in full according to this government pension credit calculator. Of course in reality £1m a week might be visible on the radar but plenty of scope for builders to take taxpayer pounds at lower amounts

.

For fun I did the same thing. Said I only got the state pension, paid £1,000 a week service charge and had an outstanding mortgage of £400,000.

The calculator told me I would get £1,100 a week in pension credit - around £57,000 a year before tax. That's equivalent to gross income of £80,000 a year to cover my housing costs.

Can't believe they would really pay that much out - but that's what the calculator says.

[workingpoor]

If you have savings / shares / investments other than a house an wind up on the dole your forced to liquidate assests and use all funds down to 6k before you get any help.

Why should it be any different for "homeowners" by rights they should be forced to sell and any equity used to support themselves down to 6k

This isn't the case so the next best thing is to claw back the SMI as a loan.

Also HB as a loan would really light the blue touch paper wouldn't it?

[ingermany]

For fun I did the same thing. Said I only got the state pension, paid £1,000 a week service charge and had an outstanding mortgage of £400,000.

The calculator told me I would get £1,100 a week in pension credit - around £57,000 a year before tax. That's equivalent to gross income of £80,000 a year to cover my housing costs.

Can't believe they would really pay that much out - but that's what the calculator says.

80k a year? That means you can now afford to buy a second home. No wonder HPI is maintained.

[Isakndar]

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.

I think that is an excellent observation. Comparing the relative advantages of SMI (made out as a loan or otherwise) over those on housing benefit, essentially are modifications to an existing system of super expensive land tenure supported by excess debt based money creation. The whole system needs radical overhaul.

[okaycuckoo]

On a pure, personal speculation level, I think they might be worried about the yields going up and are trying to reduce gov spending as much as possible.

Stopping SMI carries less political flack than stuff like free bus passes + fuel subs.

But they're not stopping SMI - they're securing it. If they stopped the payments, the banks wouldn't benefit.

The UK is a giant dirty secret.