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Forum Home  →  Discussion  →  Housing costs  →  Thread

Support for mortgage interest

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Rosie W
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Welfare rights service - Northumberland County Council

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Is the change to loans still going ahead next year? Sorry, being lazy and I’m sure someone here will know!

Paul_Treloar_AgeUK
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We haven’t heard that it isn’t but we also haven’t heard from anyone in DWP about it since around January time.

Rosie W
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Paul_Treloar_AgeUK - 01 June 2017 03:57 PM

We haven’t heard that it isn’t but we also haven’t heard from anyone in DWP about it since around January time.

Strong and stable.

shawn mach
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No, nothing we’ve seen either .... is currently set for April 2018

Rosie W
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Thanks Paul - I couldn’t find anything more recent that last year so that’s an improvement!

Paul_Treloar_AgeUK
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It’s a bit of a worry to be honest because we were told they were going to start calling people affected to discuss what they wanted to do from June, so whether that’s happening or not, we simply don’t know.

Further, they’ve also cancelled next week’s OSEF meeting so we can’t ask them about it directly.

Rosie W
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We’re running some benefit changes briefings this month - it’s always nice to sound like we know what we’re talking about.. It’s an exciting time to be a welfare rights adviser isn’t it. I could do with a little less excitement after more than 30 years in the job tbh.

Gareth Morgan
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What I haven’t seen is any movement on who is going to administer it.  It’s supposed to be a 3rd party and they will need to be able to administer the scheme, make the loans, recover the payment, arrange the charges on the property and provide ‘industry standard advice’ about the loans.  Getting a bit tight, I think.

Ali D
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It appears that the general election has held up the appointment of an Information Provider due to purdah. The DWP intend to start writing to all existing in work benefit claimants and Pension Credit claimants from June 2017 with a view that all will sign up to convert to a secured loan by March 2018 at the latest. Failure to do so will mean that SMI stops at that point. The loans take effect from April 2018. Claimants must ‘opt in’ to the loan. If they don’t agree, or engage with the IP, the SMI benefit will just stop and the claimant will start to fall into arrears.
The SMI loan will be secured by Second Charge. it will be interest bearing. Any existing charges will take priority over the SMI charge, and action will only be taken to seek recovery of the loan when the owner (or their estate) sell the home.

Until the IP is appointed there is no detail available about how DWP will identify vulnerable claimants to ensure that they are able to engage. This is likely to be a big issue as by their own figures indicate that of the initial 135,000 claimants targeted, 48% are on PC. I have not seen any information on when they intend to start to address existing out of work benefit claimants or new claims but we are likely to get this information in the coming weeks.

Along of course with the first of many client enquiries.

Gareth Morgan
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I did quite a lot of modelling when the consultation on this took place,several years ago (see http://blog.cix.co.uk/gmorgan/2015/08/20/mortgage-interest-changes-finally-on-their-way/ ).  The DWP assumption seemed to be that the, then, OBR, assumptions on short-term house price inflation shown in the House Price Index (HPI) of 3.5% per annum would continue long term (extremely questionable).  On that basis the increase in value would offset the loan recovery amount for many people.  If HPI is less then things look very different.  Yesterday it was announced that house prices had fallen in each of the last 3 months, while today there are press articles forecasting a crash in prices.  My models show that with moderately less optimistic forecasts than the DWP used, negative equity arrives very quickly for many people.

Still it means that there’ll be nothing to take for social care, I suppose.

[ Edited: 2 Jun 2017 at 10:22 am by Gareth Morgan ]
Ali D
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Hi Gareth

I read your article at the time with a sinking heart.  It is a pity that this change is slipping in under the radar as the public and the politicians seem unaware of the issue and the massive impact that it is likely to have. The impact will greatest in cases where claimants need help over the longer term but even where a claimant gets short term help, it is likely that lenders will refuse any further advances on existing loans (even though these take priority) and getting a re-mortgage in the future will be next to impossible.

 

[ Edited: 2 Jun 2017 at 10:57 am by Ali D ]
nevip
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“I did quite a lot of modelling when….”

What, swimwear, lingerie?  I think we should be told

Gareth Morgan
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nevip - 02 June 2017 12:31 PM

“I did quite a lot of modelling when….”

What, swimwear, lingerie?  I think we should be told

I shall link you to my holiday pictures - roll on Tuesday next week.

Paul_Treloar_AgeUK
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From Gareth’s blog - Local authorities see their long-term care costs substantially contributed to, by the remaining equity in their homes, of those entering residential care. That contribution may be reduced by this proposal, with consequent effects on local authority budgets.

Individuals, who have seen the equity in their homes as contributing to their retirement funds, care needs or as an inheritance for their heirs, may have to alter their plans.

A homeowner with a mortgage who becomes unemployed in their late 50s may see little opportunity for employment but expect over 20 years more of life. If the example shown in figure 2 is to be expected, any equity in the home would have been lost by this time.

An Equity Release scheme could allow them to make early use of the equity and, if gradually applied, need not affect the net amount of their benefit income. Releasing funds early, in this way, may benefit the financial services industry and reduce government costs in the short term. The additional needs of older claimants and those in need of care may, however, outweigh these effects.

Given that we’ve also got an extra £100,000 threshold on Inheritance Tax, direcrly related to passing on your home to direct descendents, (on top of the existing £325,000 threshold), and the Tories meddling with social care charging and property, I think all of the above becomes both more worrying and far more complex to understand.

nevip
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Gareth Morgan - 02 June 2017 01:30 PM
nevip - 02 June 2017 12:31 PM

“I did quite a lot of modelling when….”

What, swimwear, lingerie?  I think we should be told

I shall link you to my holiday pictures - roll on Tuesday next week.

Oh the horror!

Rosie W
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Thanks everyone for all the info - very useful.