Housing Benefit and Mortages

[Amethyst]

Can anyone explain to me how this works. I know they pay the interest on a mortgage and you have to find the money to pay the repayment portion. But what happens when the interest rates change, if you are on a fixed rate, do the social keep paying the fixed rate or do they pay the base rate only ?

[Mochamoo]

Re: Housing Benefit and Mortages

Does this help you x

Homeowners Mortgage Support Scheme - Policy scheme description

Eligible Group:

The Government guarantee will only attach to loans where borrowers:

• have demonstrated that they have had a temporary loss of household income from employment or self-employment of a scale which affects the household's ability to make full mortgage payments, but which is not expected to be a permanent loss of income. Evidence of income loss must be provided by borrowers for lenders to validate eligibility.
• have been making regular payments (but not necessarily in full) in agreement with their lender for at least five months
• the lender and borrower must have discussed alternative forbearance options and, where appropriate, exhausted these before the borrower is entered on to the scheme
• have received debt advice from an accredited debt advisor. Borrowers should receive a Common Financial Statement or equivalent, confirming basic financial information such as income and expenditure, that can be shared with the lender. The advice will encourage the borrower to consider the long-term sustainability of the borrower's financial position, and the impacts and potential risks, including to the value of equity in the property, of entering the scheme.
• have been assessed as being able to pay at least 30 per cent of the total monthly interest payment at the point of entry on to the scheme. Borrowers will need to continue to pay as much as they can, subject to this minimum amount
• have total outstanding charges against their home no greater than £400,000 (excluding charging orders as they are ineligible for guarantee under the scheme)
• have no savings in excess of £16,000 ie. the equivalent limit to Support for Mortgage Interest
• be an owner-occupier with the mortgaged property as their sole residence. Shared ownership or shared equity mortgages are covered by the scheme. The guarantee will not apply to buy-to-let or investment properties. A household possessing more than one home would not be eligible for the scheme
• have purchased their property with a mortgage before the 1 December 2008. Homeowners will be able to re-mortgage on their existing property the principal outstanding after this date and will still be eligible for the scheme
• are not eligible for Support for Mortgage Interest (SMI)
• have been placed on interest-only terms as part of being qualified for the scheme. Borrowers seeking such assistance must be willing to switch their loan to such terms, as must the lender.
• households with a second charge loan or a charge secured against their property may still be eligible for the scheme. The borrower will need to secure the agreement of all lenders with charges against the home (excluding charging orders) to be entered into the scheme. Borrowers will need to pay a minimum of 30 per cent of the monthly interest payment for each loan. Following launch of the core scheme for households, we will also explore options for extending the scheme so that it can be made available to small businesses which have stopped trading

It should be noted that the final decision on eligibility for (subject to the criteria set out above) and acceptance into the scheme remains entirely that of the lender.
Scheme Duration:

• the scheme will run for two years subject to review and will be open for new entrants over that period. The deferral period will apply to borrowers for an initial period of up to one year from their point of entry at which point a review of their continuation on the scheme will be conducted
• if during that period the borrower's circumstances improve such that they are able to stop deferring interest, they will be expected to do so and the lender will be expected to require this. Once interest is no longer being deferred, the borrower leaves the scheme and there is no guarantee associated with subsequent payments. A borrower would be able to leave the scheme at any time, pending agreement for a new schedule of payment with their lender. Accurate and full information on their financial circumstances will need to be provided by the borrower to the lender at the one year review point to remain on the scheme
• the lender will review the borrower's eligibility to remain in the scheme after a year. This review will include consideration of the ongoing temporary nature of the borrower's income drop and the borrower's eligibility. The review must be informed by further advice from an accredited debt advisor, including advice for the borrower about the implications of continuing on the scheme and potential other options.
• it is possible for a borrower to come back into the scheme, having left it, if they fall back into arrears as long as they meet the eligibility criteria and the lender believes they could benefit from the scheme
• the period in which claims can be made under the guarantee will last for 4 years after the borrower comes off the scheme. As a condition of participation in the scheme, lenders will need to commit to best practice in forbearance when the borrower exits the scheme, and agree reasonable and affordable repayment schedules, with the aim of keeping any subsequent repossessions to a minimum.
• after this, the liability returns to the lender, since it is assumed that a household still remaining in their home for that long will be continuing to make normal payments by that time

The Government Guarantee:

• the total amount of the Government guarantee will not exceed 80% of the total interest guaranteed and rolled-up into principal
• if, during the period of guarantee, the borrower defaults, then the Government will pay their lender the equivalent sum of the total amount of the Government-guaranteed interest deferred that is not recoverable from equity in the property (and, in addition, "interest on the interest" to an agreed formula). The Government will only accept a claim on a property that has been repossessed and sold
• the Government will not guarantee any interest deferred on payments made under a charging order. As stated previously however, borrowers with such orders against their properties may still be eligible for the scheme
• the Government will impose an interest rate cap of 8 per cent benchmarked appropriately to the base rate. Mortgages at rates in excess of this cap could still be included in the scheme but the guarantee would only apply up to the capped rate of interest. Lenders will be required to maintain the borrowers' contracted rate of interest when they enter the scheme at or below the current contracted rate of interest, subject to reasonable changes linked to base rate movements
• the Government will set caps on the liabilities incurred for each participating lender. At scheme launch, each lender will be allocated an initial cap for the first year based on their market share of lending secured against residential property. To ensure that all lenders participating in the scheme have a reasonable cap allocation, lenders will be able to access an additional allocation subject to providing information about the number of borrowers they have in arrears

Lender Forbearance:

• for each month that the borrower remains on the scheme, the lender will add the month's worth of interest deferred to the borrower's total principal mortgage debt
• the lender must conduct regular assessments of the borrower's financial condition including a comprehensive review after the borrower has been on the scheme for a year
• as stated above, lenders will need to commit to best practice in forbearance when the borrower exits the scheme, agreeing reasonable and affordable repayment schedules with borrowers

Borrower Assistance and Implications:

• borrowers will need to provide proof of loss of income and confirmation that they have received independent debt advice to be deemed eligible for the scheme
• borrowers will need to be deemed able to pay at least a minimum monthly payment of 30 per cent at the point of entry into the scheme to be eligible. In all cases, the borrower should pay the highest level of contribution they are able to pay
• interest payments deferred under the scheme by the borrower will be added to the total amount of their existing debt on a monthly basis. Borrowers will not be exempt from payment, and will simply be deferring payment until their personal situation improves
• application of the government guarantee does not diminish the borrower's existing legal obligations regarding their mortgage

Once the scheme is in operation, the Government will monitor performance and keep the scheme's design under review. Any changes would not apply retrospectively.

[CYNthesys]

Re: Housing Benefit and Mortages

I understand DWP currently pay 6.08% for mortgage interest. I think this was set in or around October/November 2008, and that this rate will remain in place for 6 months.

[Amethyst]

Re: Housing Benefit and Mortages

Is that regardless of what rate the mortgage holder actually pays?

[CYNthesys]

Re: Housing Benefit and Mortages

Believe its a set rate across the board
I came across this on the welfare advisors Rightsnet site
------------------------------- merged -------------------------------
Support for Mortgage Interest – update

27 January 2009

If a homeowner with a mortgage gets Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance or Pension Credit, their benefit may include an additional element called Support for Mortgage Interest (SMI). SMI is meant to assist the homeowner with the interest on their mortgage. SMI is calculated using a standard interest rate.
On 24 November 2008, the Chancellor made clear in the Pre-Budget Report that the Government will maintain the level of support for mortgage interest based on a standard interest rate of 6.08 per cent for six months.
Some people will experience a temporary drop below 6.08 per cent because our IT systems normally track the Bank of England base rate, which was reduced from 6 November. It takes time to adapt our IT systems, but we are taking urgent action to ensure that customers do not lose out, and that cases are corrected to reflect the Chancellor’s commitment. Overall people will receive 6.08 per cent support.
http://www.dwp.gov.uk/aboutus/news/

[Amethyst]

Re: Housing Benefit and Mortages

Ah thanks Cyn.


that seems daft because people on tracker mortgages their rate will be down something like 3% - so that means they are getting too much at the moment ?

Whatever they shouldnt be worse off should they due to the interest rate falling.

Will ask the person who is struggling with this to come have a look.

[CYNthesys]

Re: Housing Benefit and Mortages

Believe when this was debated the logic behind it was the government accepted that many families had fixed rate mortgages, and they couldnt guarantee lenders would reduce other mortgage rates when base rate fell,

[Emerald]

Re: Housing Benefit and Mortages

Ah thanks Cyn.


that seems daft because people on tracker mortgages their rate will be down something like 3% - so that means they are getting too much at the moment ?

Whatever they shouldnt be worse off should they due to the interest rate falling.

Will ask the person who is struggling with this to come have a look.

They may be getting more than their interest at the moment but it will reduce the capital slightly. It will change very 6 months, so when rates start rising it is likely for a few months they will not be getting the full amount as it catches up.