Mortgage Arrears to Increase as DWP Mortgage Support Cut
The announcement that the mortgage interest rate that the Department of Works and Pensions pays under the Support for Mortgage Interest Scheme is to be cut, will be devastating for many low income households.
The Scheme, which pays the interest part of a benefit claimant’s mortgage, does so only up to certain levels of interest rates. Currently, that rate is 6.08%, so if your mortgage rate is higher than that, there is a shortfall on the interest part of your mortgage payments which you need to make up. As the scheme only pays the interest part of you mortgage, many claimants, even when they are receiving full payments to the interest, must make additional payments from their benefits to the capital part of their mortgage.
After the 1st October, the rate will fall to 3.63%. This is the Bank of England’s average monthly mortgage interest payment. For many low income families, however, usually the groups that are more in need of help and least able to get the most competitive rates available, this will not be enough.
With increasing signs that mortgage lenders are not allowing borrowers to switch to interest only mortgages, the most vulnerable could see shortfalls, not only in the capital repayment element of their mortgage, but the interest element also.
If further proof is needed that repossessions will begin rocketing out of control under this ConDem coalition, this is it. To date the actions of the previous Government at Westminster and the Government in Edinburgh have prevented repossessions reaching the level predicted by the Council of Mortgage Lenders and in actual fact there is evidence they have fallen.
But not for long!