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Q I was on benefits, receiving a small amount of income support (£14 a week) and help with interest on my mortgage of approximately £280 a month. Now that the Bank of England base rate has fallen I am told by the Department for Work and Pensions (DWP) that because of this my income support will reduce to 10p a week and (more importantly) my mortgage assistance will drop to only £15. I can now no longer afford my mortgage repayments and am faced with the prospect of getting into arrears or selling my house and having the council pay out a ridiculous amount in rent for my children and myself. Is it right that the reduction in interest rates should make us so much worse off when I thought it was supposed to help the economy, or is it only designed to help the better off? DE
A I suspect that what is not right is what you have been told by the person at the DWP. It is true the standard rate of interest used to calculate how much mortgage interest support you get is normally linked to the base rate and goes up and down in line with any changes, and normally it is the base rate plus 1.58%, so according to the legislation in place since 2004 the standard rate should now be 3.58%. But it is not because in December 2008 the standard rate was frozen for six months at 6.08%. This has specifically been done to protect people, such as those with fixed-rate deals, whose mortgage payments may not have dropped in line with the base rate and who would suffer if their mortgage interest support were to fall.
Yvette Cooper, chief secretary to the Treasury, confirmed this freeze in the House of Commons on 18 December. The earliest the standard rate of 6.08% will change is May 2009 when the government intends to review the arrangements for calculating mortgage interest support.
I suggest you go back to the DWP and get them to double-check how much support you are entitled to given that it shouldn't have gone down in line with the interest rate at all.
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