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Forum Home  →  Discussion  →  Universal credit administration  →  Thread

universal credit - support with mortgage interest

Robbie Spence
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Independent benefits adviser and trainer

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The rightsnet story on 14 October, 2011 - Support for mortgage interest under universal credit will continue ‘as now’, says Lord Freud, (http://www.rightsnet.org.uk/news/story/support-for-mortgage-interest-under-universal-credit-will-continue-as-now-s/) - reports that, when asked whether the government would be extending help with mortgage interest to people who are in full-time paid work, Lord Freud replied -

‘No. I am saying that we are leaving the rules as they currently are, because we will give support to people who lose a job for those two years. That is the process and we are not planning to change it any way.’

Here at Disability Alliance’s Benefits of Working service, we find that one of the only groups of people who are worse off when they move into work of 16 or more hours a week is people who lose their support with mortgage interest at that point. 

Lord Freud’s announcement seems to undermine Iain Duncan Smith’s stated aim that universal credit will make work pay.  It is likely to perpetuate the current system and fail to make work pay for people who get support with mortgage interest.

[ Edited: 28 Oct 2011 at 11:17 am by shawn mach ]
DaphneH
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Welfare Rights Adviser, Bristol City Council, Bristol

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I was horrified by this - there was nothing in the welfare reform bill to suggest that help with housing costs would be limited to those working under 16 hours - it was one of the real positives of universal credit to remove this injustice. Does anyone know anything further?

Paul Treloar
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It really does beggar belief doesn’t it? We certainly found the same thing when I worked on Gingerbread’s SIngle Parent Helpline that, for people with larger mortgages, the potential gain (or often loss) when moving into work made no economic sense for the client, and I had certainly assumed that this glaring anomoly would be removed with UC. It’s starting to fall apart at the seams before it’s even started.

DaphneH
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Welfare Rights Adviser, Bristol City Council, Bristol

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I am tempted to write to IDS myself and ask him what is going on!!

Gareth Morgan
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Actually, even though this came as a surprise to me as well, there is a complex calculation which makes some winners.

Earnings disregards in UC start off high (even higher after the CTB compensation increase announced a week or so ago) and get reduced by 1.5 times the housing element until they reach a substantially lower floor level.  If there’s no housing element then the higher disregard stays in place so for families with a high disregard starting point and a low mortgage they can be better off in this scenario.

Paul Treloar
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What constitutes a low mortgage Gareth?

Paul Treloar
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And the new UC is going to be simpler???!!!

Jon Blackwell
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Gareth Morgan - 02 November 2011 10:38 AM

Actually, even though this came as a surprise to me as well, there is a complex calculation which makes some winners.

Earnings disregards in UC start off high (even higher after the CTB compensation increase announced a week or so ago) and get reduced by 1.5 times the housing element until they reach a substantially lower floor level.  If there’s no housing element then the higher disregard stays in place so for families with a high disregard starting point and a low mortgage they can be better off in this scenario.

My thinking was that the UC recipients in the worst position (ie those with income above disregard level and disregard above floor) would still see 2.5p of extra credit for each extra pound of eligible housing costs (+1 - 1.5 x 0.65 = +0.025) so the loss of UCSMI at 16 hours would still be a real loss regardless of the size of the mortgage, but much clearly smaller loss than for those unaffected by the disregard reduction.