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Support for mortgage interest
Reg.16(1)(b) provides for immediate repayment upon transfer, assignment or otherwise disposed of, unless para.(c) applies, so the death of the wife and the fact of the husband surviving precludes that happening.
So…. does that mean that the loan is not repayable but SMI stops being made to the lender? Who then has the duty to tell the DWP when the house is sold or the survivor dies? Admin nightmare looms.
[ Edited: 22 Aug 2017 at 03:26 pm by Gareth Morgan ]It would be interesting to see some calculations showing how much debt will accrue on range of mortgages for people who have a loan towards mortgage interest for varying periods, especially when borrowed over along period.
What’s the financial impact of charging interest on the DWP loan made towards interest on the mortgage. basically, borrowing to fund borrowing? Something debt advisers strongly advise against!
I am surprised what little opposition there has been to this measure. My fear is that it legitimises making working-age benefits repayable - something right wing elements now advocate.
in reg 16 para 7:
(7) In the event that the relevant accommodation is sold or legal or beneficial title in, or in
Scotland, heritable or registered title to, the relevant accommodation is transferred, assigned or
otherwise disposed of for less than market value, the disposal shall be treated as if it occurred at
market value for the purposes of repayment.
Anyone know who is going to decide what market value is? Is this going to be on of those District Valuer things?
No idea Damian, can’t see anything in regs or explanatory memorandum or any of the supporting materials.
It would be interesting to see some calculations showing how much debt will accrue on range of mortgages for people who have a loan towards mortgage interest for varying periods, especially when borrowed over along period. .
I did quite a lot of modelling of the effect of the earlier proposals for this scheme. The big effects come from the, unknown, rates of house price inflation (HPI). The DWP once told me that they were working on the basis of 3.5% HPI year on year for 30 years.
In the case in question the joint GPC entitlement would cease immediately on the death of wife and as husband has an income well above the single limit, no further GPC claim would be made. Reg.16(1)(b) provides for immediate repayment upon transfer, assignment or otherwise disposed of, unless para.(c) applies, so the death of the wife and the fact of the husband surviving precludes that happening.
In the version I have from legislation.gov.uk the limiting provision in sub para (b) is “unless paragraph (3) applies” which since the hubby didn’t get the house in this example doesn’t seem to apply. So I think the only event from para (1) which has happened is sub para (b) (house transferred to kids) so presumably the DWP will grab the money back?
In the version I have from legislation.gov.uk the limiting provision in sub para (b) is “unless paragraph (3) applies” which since the hubby didn’t get the house in this example doesn’t seem to apply. So I think the only event from para (1) which has happened is sub para (b) (house transferred to kids) so presumably the DWP will grab the money back?
Well spotted, I mistakenly read para.3 as referring to reg.16(1)(c) in error. On the presumption that there isn’t any argument that husband would have any beneficial title transferred to him as he remains in accommodation, then I think you are indeed correct that DWP could demand immediate repayment when wife passes away and could also force sale of house at that point.
Wow, this gets worse and worse.
Another query. 16.(1) (a) says “the relevant accommodation is sold”. Does that mean ‘all’ of it or ‘part’ of it. If I sell £99,999 of a £100,000 house to the kids , clear the £90,000 mortgage and spend the rest before dying, there’s £1 of equity left in the property, so the rest of the loan gets written off? Alternatively, if I sell them £5 worth, is the loan repayable?
In the version I have from legislation.gov.uk the limiting provision in sub para (b) is “unless paragraph (3) applies” which since the hubby didn’t get the house in this example doesn’t seem to apply. So I think the only event from para (1) which has happened is sub para (b) (house transferred to kids) so presumably the DWP will grab the money back?
Well spotted, I mistakenly read para.3 as referring to reg.16(1)(c) in error. On the presumption that there isn’t any argument that husband would have any beneficial title transferred to him as he remains in accommodation, then I think you are indeed correct that DWP could demand immediate repayment when wife passes away and could also force sale of house at that point.
Wow, this gets worse and worse.
That is how I read it. Poor hubby could well be made homeless if he or his children refused to settle the charge on the basis that they (hubby & children) were not party to the charge being applied in the first place.
Upon a forced sale the remaining proceeds would then pass to the children.
Interest rate for SMI payments = 2.61%
Interest rate for SMI loans = 2.2%
Is this correct or am I missing something?
We’ve started recieving enquiries from older people now, most of whom are reporting huge amounts of stress and anxiety about what’s being asked of them and the decisions that they’re being required to make (one person won’t answer the phone to SERCO as she’s so scared).
Where’s the 2.2% from. The last forecast gilt rate, as at March 17, was 1.7% for next year. It is 2.2% for 2021 / 2022.
Where’s the 2.2% from. The last forecast gilt rate, as at March 17, was 1.7% for next year. It is 2.2% for 2021 / 2022.
What client was told by SERCO apparently.
I am puzzled by the 2.2% that Serco are quoting. The regulations, although convoluted, seem clear.
They say:
15. (3) The relevant rate is the interest rate for the relevant period.
15. (5) The interest rate referred to in paragraph (3) is the weighted average interest rate on conventional gilts specified in the most recent report published before the start of the relevant period by the Office for Budget Responsibility under section 4(3) of the Budget Responsibility and National Audit Act 2011(a).
(6) The relevant period is the period starting on—
(a) 1st January and ending on 30th June in any year; or
(b) 1st July and ending on 31st December in any year.
The latest forecast by the OBR was published in March 2017 but there is expected to be another one at the time of the autumn budget in November.
The forecast in March covered a range of years and shows
Percentage change on previous year, unless otherwise specified
Outturn Forecast
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
Market gilt rates (%) 1.9 1.2 1.5 1.7 1.9 2.0 2.2
If the single decimal place rounding is removed the table gives, with more precision:
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
Market gilt rates (%) 1.88 1.22 1.46 1.66 1.85 2.02 2.16
There are two relevant periods in any year – January to June and July to September – and the interest rate is the rate for that period, as 15 (3) states. That is determined by the most recent report by the OBR before the start of that period. It will be November’s report when the new rules come into force but, for now, the latest figures are those in March’s report. If that figure was to be used, which seems the best information to hand, then the rate should be 1.7% for the year2018 / 2019. Serco seem to be using the rate for the year 2021 / 2022.
Why?
Don;t know, I’ve asked for clarification from DWP so will let you know as and when.
Gareth - isn’t the interest rate you’re looking at the rate you get charged on the loan - which is different from the standard interest rate that they assume for the mortgage payments which I thought was where you started Paul - or am I getting confused?