Another instalment in my occasional series* on how the government is doing its best to make sure that the priced out generation stay priced out...
State benefits for homeowners struggling to pay their mortgage after losing their jobs are to be paid more quickly and to more people. The government's Support for Mortgage Interest benefit has been extended to include mortgages up to £200,000 - double the previous limit. The waiting period to qualify has also been reduced by two-thirds to 13 weeks. Eight UK lenders have joined a separate scheme allowing mortgage holders to defer part of their interest payments.
* Full series.
Monday 5 January 2009
Another day, another desperate throw of the dice (16)
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18 comments:
I can't see it really having an upward effect on prices.
Only rent rises could do that.
Seems like a good scheme to me. There's going to be a lot of people with smaller mortgages, who will be cheaper to house by supporting their mortgage than by paying their rent.
MA, this is just a subsidy to home owners, and all subsidies come out of Other People's Taxes, so, if the scheme works (which it won't) then the priced out generation are paying more tax and it is harder for them to buy a home.
Don't forget, repossession is a zero sum game: for every repossessed household there is another one that can now afford to buy, freeing up rented accommodation for the repossessed family.
When will the people of this country learn that giving home owners special privileges makes us collectively worse off?
The main thing is confidence in huge price increases. If that's not there, people don't think buy-to-let is like free money, and FTBs don't feel the desperation to join the market.
My guess is that in real terms, such confidence has an effect of something like 30-40% on prices.
Keeping people in homes won't do much to change that, and in fact may simply delay the adjustment a little.
True, but the alternative to paying my mortgage is to pay my rent, as I will soon be unemployed.
Rent will be a higher amount, given my mortgage is small.
The taxpayer is about to subsidise my entire lifestyle, due to its government's failure to run the economy in a sensible fashion. By choosing to support my mortgage they will be minimising the tax burden. If they wanted to make some claim on some of the equity in my property, that could be fair.
I disagree with your statement about a zero sum game. Normally, you are quite right, but in the coming crisis I think we we will see lots of boarded-up houses and folks moving in with relatives.
MA, if the bank has repossessed, wouldn't they sell it on or let it out sharpish?
Anyway, LVT would sort out that little problem.
Anyway, final thought, as somebody points out in my cross posting at HPC, a tenant doesn't get any rent paid if his savings are > £16,000. So why should a homeowner with equity of that amount get his mortgage paid?
I wonder how many of those now feeling the pinch because of impending redundancy declined to take any form of insurance for the mortgage payments because (a) "my job is secure" or (b) "it's too expensive".
I don't class my own employment as having security over the next 12 months, and yet recognising the way things have been going I've been what I like to think of as prudent and took out such insurance 12 months ago. But once again, having been prudent, I now watch as I carry on making sacrifices to ensure as best I can our family situation is under control, and a load of people who didn't bother will be bailed out by, oh, wait one, that would be me and Mrs FT, wouldn't it?
Investment advice for 2009: gold, tinned goods, shotgun shells and a few large cylinders of propane sound like a good start. And hempen rope, just in case the wonderful day arrives.....
Nut much of a market to sell it on, buy to letters have run away, private buyers either can't get a mortgage or are to worried about increasing debt to do it. Houses in my street have been on the market for a year, hence my comment about boarded up houses.
MA. Accept your lumps. Don't pretend it's ok to stiff me with the bill. Even worse, don't piss on my back and tell me it's raining by pretending it'll save me money.
FormerTory,
My reason was (c) they're a rip-off.
I'd rather pay it off the mortgage to shorten the term than give 25% of it to a broker and 5% to the government each month.
Tim, then you didn't do enough work looking for a solution. Mortgage lenders routinely add 60%+ commission, so look for an independent provider who doesn't. Second of all, how is it a rip-off if it keeps you in your house? Oh yes, I forgot. I'll be paying for you and Marksany instead.
Time to bend over and apply more Vaseline, I think. Raise a glass to me, if you will; you can probably afford it while I'm paying your mortgage or rent.
By the way; did you cancel your last holiday because you were paying air taxes to the government? Did you refuse to renew your car insurance, or your buildings insurance, because the broker got 25% (or whatever?) Or because you could reduce your mortgage or the car loan faster? No, I didn't think so.
Consistency is a wonderful thing; reading too much financial comment in the Daily Mail isn't. There are more ways than one of skinning a cat.
NVM, be a bit nicer to Marksany - he did say that he'd accept some sort of forced equity release.
FT, to be fair, this mortgage repayment insurance is by and large a hugely expensive con. As Tim says, the sensible thing is to repay your mortgage as fast as possible, or, possibly to overpay in case you need a repayment holiday, or even stick a few hundred quid a month into an ISA so that you have something to tide you over. (FWIW, I did a combination of the last two, I hate paying for insurance).
But all these are decisions that borrowers have to take for themselves (there is no 'right' or 'wrong' answer), what winds me up is that 'home-owners' get much better benefits than tenants - because benefits are reduced if you have cash savings or shares but not if you have the equivalent amount in mortgage equity.
This is taken to extremes with the Pension Credit and Council Tax Benefit for pensioners. Because both are savagely means tested if you have cash or shares (but not housing wealth), pensioners can actually end up worse off (in cash income terms) if they do the economically rational thing and sell a large, former family home and trade down to a flat and stick the proceeds on deposit.
FT,
"Tim, then you didn't do enough work looking for a solution. Mortgage lenders routinely add 60%+ commission, so look for an independent provider who doesn't. Second of all, how is it a rip-off if it keeps you in your house? Oh yes, I forgot. I'll be paying for you and Marksany instead."
It's not that I didn't do enough work. It's not on my radar because it's a bad bet. They aren't going to pay back more than what gets paid in.
You really think you could be repossessed? That you could be out of work long enough for a repossession to occur (they generally take at least 6 months to process). Unless you can't get a job close to your current earnings, it's extremely unlikely to happen.
Most reposessions are people who hugely overstretched themselves in the good times or just plain refuse to pay.
Add to that that if you've got sufficient equity, you could sell the house, take the cash and use it for rent until you get back on your feet as the worst option.
"Time to bend over and apply more Vaseline, I think. Raise a glass to me, if you will; you can probably afford it while I'm paying your mortgage or rent."
Cheers!
"By the way; did you cancel your last holiday because you were paying air taxes to the government? Did you refuse to renew your car insurance, or your buildings insurance, because the broker got 25% (or whatever?) Or because you could reduce your mortgage or the car loan faster? No, I didn't think so."
Those air taxes aren't optional for me to have that. I'm not saying don't do it because of the tax, but because the tax is part of the calculation of the maximum return on your gamble. If commission is 25%, IPT is 5%, the most you can hope will be paid from all policies is 70%. It's a bad bet, like most insurance.
There are reasons for taking out insurance and these are where you can't manage the negative outcome (e.g. your house burning down). The only other reason is if you think they've miscalculated the premiums against the risk.
MW-thanks for leaping to my defence. Equity release to the state seems fair in return for state support, and that could apply to all the benefits you mention.
Having paid tax and NI as a higher rate payer for 25 years, I don't think some support in the bad times I am facing is unreasonable - I ain't no Karen Matthews.
MA, you're the welfare reform minister, you tell me what's fair.
I believe in CBI type schemes - but this precludes favouring one group (in this case homeowners) over another (in this case tenants) - either we have asset-based means testing that ignores housing wealth (worst); asset based means testing that includes housing wealth as well (less bad) or we have none at all (least bad). And if that means that some lose out, then so be it, provided the majority (i.e. taxpayers and those who now are at least entitled to something rather than nothing) gain.
OK, OK; I accept that many of the insurances are indeed expensive. No argument. In my case, I've finally got to a point in my life where I have money in the bank (some, anyway) and no debt other than my modest offset mortgage on which I pay a few pounds interest a month. I live in a remote area of the country (by choice; a few years in London was the catalyst). My livelihood is indeed under threat from the present shenanigins.
Could I find alternative employment? Yes, but probably not at the same income. Do I have the patience / humility to have some oik at the Jobcentre give me advice on my CV and asking me if I've done research for that job stacking cans on shelves at Tesco? Er, no. Do I want to pay off my mortgage? No. I like the feeling of having some readies.
So is it worth a few quid a month to me, in my circumstances, to buy myself some breathing space? Oh yes.
Do I still feel pissed off that the irrational overspend brigade appear to be about to be forgiven their transgressions? At my expense? Oh yes.
Make it quick, Tim; looks like a long queue behind you. As fecking usual.
Or paraphrased:
"I think we've been through a period where too many people have been given to understand that if they have a problem, it's the government's job to cope with it. 'I have a problem, I'll get a grant.' 'I'm homeless, the government must house me.' They're casting their problem on society. And you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It's our duty to look after ourselves and then, also, to look after our neighbour. People have got the entitlements too much in mind, without the obligations. There's no such thing as entitlement, unless someone has first met an obligation."
:-D
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