SMI Mortgage Interest 50% Cut !

[andydd]

I was shocked to recieve a letter from DWP this morning telling me the amount they pay to cover my mortgage interest is to be cut by almost 50% at the end of this month, I tried phoning but couldnt get through.

 

However a quick google gave me my answer

 

Mortgage interest support

 

The current system of mortgage interest support means that 92% of customers get more help than they actually need. To ensure that Support for Mortgage Interest (SMI) is better targeted we will reduce the rate from 1 October 2010 from 6.08% to the Bank of England average (currently 3.67%).

 

Which was hidden half way down the page on http://www.dwp.gov.uk/newsroom/top-stories/

 

There was no explantion on the letters from DWP, you would of thought such a major change which is effectively going to cut the amount that millions receive would of been better communicated, when I spoke to my mortgage company, even they were unaware !..and it is going to effectively hit them hard as they will have millions of customers who now won't even be able to afford the interest payments on their mortgage let alone the capital payments.

 

As discussed elsewhere in this forum, the reality is that there are not many people who actually do have a interest rate as low as 3.67 %, I am still stuck on a fixed rate of 5.2% but at least only untill the end of the year.

 

I'm surprised that this isn't a bigger news story, there must be many people who are just holding onto their homes and this will push them over the edge.

 

Yes, its true that there are people who get 'overpayments' in the current system but the new system will no doubt mean 'under payments' for many (why don't they print a percentage of that ?).

 

Andy

[andydd]

Some good info here, which points out that many people are going to suddenly find themselves in difficulty.

 

http://rehoused.wordpress.com/2010/08/19/uh-oh-support-for-mortgage-interest-changes/

 

Andy

[andydd]

Well..Looks like the BBC are interested, i am really shocked that this doesnt appear to have (so far) been picked up by the media, I was unaware that there was any change coming, I only found out yesterday that it is to take effect in 13 days time !. How can I prepare for that ?. For many it will be the biggest benefit change ever. (This is on top of the DWP already screwing up my payments , they havn't been paying anything, many phone calls later, hopefully it is now resolved)

 

We all know that the B of E base rate is the lowest ever but loans and credit have never been more difficult to obtain this means that in reality the actual rate people will be paying will be far in excess of the 3.63%, I know mine is and I have a relatively long/good relationship with my mortgage company, but there must be many people who are paying 5,6,7,8,9% or higher, they will be totally screwed come their next mortgage payment date, this is of course assuming that their mortgage company has already allowed them an interest-only period.

 

The government claim that this is to 'better target' the resources but I can't understand that at all, by 'better' they mean 'less'.

 

Andy

Edited September 17, 2010 by andydd

[andydd]

Just found this discussion document. www.dwp.gov.uk/docs/support-for-mortgage-interest.pdf

It has lots of facts and figures (compliled by the government), it shows that 72% on SMI are NOT on a low tracker mortgage, it alos goes on to point out that at least 50% of people will now be worse off !

Andy

[andydd]

Will this make a difference to people who are on an Interest only mortgage too?

 

Yes..If you get help from DWP under the SMI scheme, they only help towards the interest part anyway so its irrelevant if its interest-only or repayment.

 

Andy

[andydd]

Well..Posting on CAG does wonders, I've just filmed a piece for BBC Breakfast News about this !...it was rather terrifying, it shoould be shown monday morning !

 

Andy

[andydd]

Another good article here http://www.talktalk.co.uk/money/guardian/news/2010/09/5/disabled-homeowners-fear-repossession-as-mortgage-interest-payments-cut.html.

 

I think that many people were unaware of the implications of this cut untill yesterday when letters from DWP/Job Center started arriving through their door.

 

Andy

[andydd]

Hi, I am disabled father of two and husband who cares for my ill wife,I recieve DLA mobility and the lower care componant and ESA. I used to work two jobs and run a successfull business. I bought a house which is modest and was well within our means and unfortunately, due to bad luck have came out of work due to a back injury and my wife has also suffered a serious illness. I have been claiming SMI interest for just over a year. My mortgage rate is fixed at 6.29% untill july 2013. My interest payments are £950 per month which is similar to equivilant rents in the area. I was recieving £750 per month towards this and struggled to top up the other 200 per month. My new SMI payments are £104 per week(£450 per month)!!! ( i now will have to find £500 per month xtra)If I were renting paying the same amount £950 per month I would be getting an extra £800 per month in benefits!!!!! This is crazy...I thought this country wants to save money!!!!

 

My payments are relatively modest compared to yours but it is still a worrying situation, if you look at my Talktalk link above, it is specifically about disabled homeowners and the problesm they face.,

 

I was interviewed by BBC News yesterday and my main point was that they have only given us 2 weeks notice of this sudden cut and where do they expect us to find the extra cash from ?.

 

If you read my DWP link above somewhere it has lots of statitics that show that only 28% of people are actually on a low tracker mortgage of around 2%, the rest are on far higher rates, the governemt point out that at present 92% of people receive more than the interest BUT under the new system only 50% will get all their interest paid, the rest will have to (try) and make up the shortfall, many will find this impossible, the government then seems to shift the burden on to the individual lenders (mine, was unaware of any changes).

 

Anyway, the BBC report should be on Breakfast News on Monday, the reporter (Samantha Washington) said that she will be contacting the lenders to add their comments.

 

Andy

[andydd]

You could phone up the Joc Center BDC and enquire as to whats going on, the person answering the phone wont know but should be able to get someone to give you a call back.

 

My letter was dated 13th and arrived Thursday (16th)

 

Andy

[andydd]

Thanks...Havn't had the nerve to watch it yet !.; I've recorded it so guess I should go watch !

 

Andy

[andydd]

Not sure what to add except that these new rules will clearly effect many people (official figures show that in reality only 28% of people are on a genuinelly low mortage of 2.1%, the rest are on higher tracker or fixed rate ones.

 

The government is well aware that this will affect people more but they want to shift the burden onto lenders, many of whom are already being very flexible, BUT these new rules do imply that lenders should be even more flexible and to quote the official report show 'foreberance'.

 

Anyone in trouble should contact their lender and point this out, the DWP report I posted early on has lots of useful info. and statistics.

 

Andy

[andydd]

Housing Costs are also going to be cut arn't they ?. I believe there will be a max limit they will pay, so people in hign cost areas such as London may find they are in trouble.

 

Andy

[andydd]

My lender was unaware of any change when I spoke to them. Not sure if my lovely (!) TV appeareance achieved anything as this still seems to have been ignored by most media, perhaps when there is a sudden increase in repossessions then people will begin to take notice.

 

The facts (from the governments own report) are that 50% of people will now be in danger of not even being able to meet the minumum of interest only payments, this is assuming your lender will accept interest-only payments, many that will (like mine) will only accept it for a limited period.

 

Andy

[andydd]

Does anyone know how the amounts of SMI are worked out please? i.e the actual mathematical formula they use??

 

e.g. (£yyyyyy x zz%) / 52 = £x weekly amount

 

because I've had SO MANY instances lately where people have got their basic maths wrong I getting a 'thing' where i feel the need to check everything

 

if not can you request the calculations used from the DWP because whilst they (sometimes) send you a letter telling you the amount it's never broken down

 

Good point, you may get more sense from your mortgage company than the DWP, although if you write to the DWP you may get a response telling you how it's calculated.

 

Andy

[andydd]

Hi all it would be interesting to find out how much affect this cut has had to guys on this site

in my own circumstances it has left me with severe arrears on my mortgage and with the payments to stop within 2 years what does people do then mortgage companies will only work so much with you and of course halifax rates has just risen so what now

 

Howdee.. At the time I was interviewed my mortgage was 5.8% or something, a fixed rate, luckily it was just coming to the end of that and went onto the standard BoE +2% rate so that wasnt too bad, shortly got a job after, although its due to end this summer.

 

Andy