The Council of Mortgage Lenders welcomes today's "call for evidence" published by the Department for Work and Pensions on Support for Mortgage Interest (SMI), and confirms it will be responding formally. The CML looks forward to working with the DWP as it seeks to improve the way in which SMI is administered.
The CML welcomes the confirmation that "the Government is committed to continue providing support for mortgage interest in future, to assist those owner-occupiers who qualify for this help to remain in their homes and avoid repossession as far as possible." But it is disappointing that there is no proposal to move away from the standard rate for paying SMI to the far superior option of paying SMI at the actual rate payable by the individual mortgage holder, so eliminating the current "winners and losers" system.
The CML in principle supports (and, indeed, suggested) one of the DWP's ideas - that there is merit in introducing an option to receive SMI for the long term in return for a charge on the property through which the State could recoup some of the costs at a later date. The CML agrees with the principle that "taxpayers should not in effect be helping people to acquire personal assets through any potential long-term rises in house prices", but believes that detailed work would be needed to ensure that the correct balance is achieved, especially to ensure that the disadvantage that home-owners already experience on housing support compared with tenants is not inadvertently exacerbated.
However, the CML is extremely concerned about the proposal to move away from the Mortgage Interest Direct scheme (under which the claimant's SMI is paid to their mortgage lender). The Government is proposing to pay the benefit instead to the claimant "so that claimants take responsibility for making their mortgage payments to their lenders in the same way that many of them did when they were in work".
While the CML acknowledges the merits of encouraging personal responsibility, in practice any move away from Mortgage Interest Direct will inevitably mean that some of the funds designed to help meet mortgage costs will be diverted to other spending by some claimants. It is difficult to see how this can be justified in terms of accountability to the taxpayer. A similar system is being introduced to pay housing benefit direct to tenants (instead of their landlords) under the new Universal Credit, which the CML and other housing and consumer groups also oppose as a result of similar concerns.
CML director general Paul Smee comments:
"It is good that the Government is in listening mode about Support for Mortgage Interest, as there is much that can be done to improve it. However, the principle of paying the benefit to claimants rather than lenders is dangerous in terms of potentially reducing its effectiveness in meeting its intended purpose."
NOTES TO EDITORS
1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 94% of all residential mortgage lending in the UK. There are 11.2 million mortgages in the UK, with loans worth over £1.2 trillion.
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