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Page last updated at 11:02 GMT, Saturday, 6 September 2008 12:02 UK

Mortgage interest help is limited

By Paul Lewis
BBC Radio 4's Money Box

Peter Tutton, Citizens Advice
Citizens Advice's Peter Tutton feels the increase could have been bigger

People over 60 will not benefit from improvements to a scheme which helps people pay their mortgage interest if they lose their job.

The government only pays mortgage interest on home loans up to 100,000. From April that will rise to 175,000.

But the BBC has learned the increase will not apply to people aged 60 or more who get pension credit.

A spokeswoman said the help was targeted on those of working age who had the greatest need.

Average limit

The limit on loans for which mortgage interest could be paid was fixed at 100,000 in April 1995 when the average home sold for less than 62,000.

The reform... is designed to provide the most assistance to those who... are most vulnerable to future changes in the labour market
DWP spokeswoman
To have kept up with house price inflation the limit should be more than 280,000 today.

The new limit of 175,000 is around the average price of a home in the UK.

Peter Tutton of Citizens Advice told Money Box on BBC Radio 4 the increase could have been more.

"That will help people as it will mean the amount you have to make up yourself is less.

"In the 1990s 100,000 was quite a large house."

But the Department for Work and Pensions (DWP) has told Money Box that this increase will only apply to people under 60 - excluding people over that age who have mortgages but cannot work and pay the interest.

A spokeswoman for the Department said "The reform to support for mortgage interest is designed to provide the most assistance to those who have taken out relatively large mortgages and are most vulnerable to future changes in the labour market."

Interest wait cut

The reduction.. should help people stay in their homes
Peter Tutton of Citizens Advice
The government also announced that it will pay mortgage interest earlier.

The current waiting period of 39 weeks will be cut to 13 weeks.

Peter Tutton welcomed the change.

"By the time you get help from the benefit system it is quite likely that your lender has gone to court and you are being shuffled out the door.

"The reduction to 13 weeks should make it more possible for lenders to wear that amount of arrears and that should help people stay in their homes."

Job Seekers' limit

Although the help will now start earlier it will now be time limited.

Unemployed people will lose all help with their mortgage interest after two years.

A spokeswoman said "People claiming Jobseekers Allowance are expected to be actively seeking work as a requirement of receiving the benefit.

"It is reasonable to expect jobseekers to find work within two years."

Peter Tutton said that was regrettable.

"They have put this limit in for people on JSA so there are things about the scheme we would question, but we do welcome that the government has woken up and taken notice that people are in difficulty."

The time limit will not apply to those on other benefits.

All the changes will apply to new claims made from April 2009.


BBC Radio 4's Money Box was broadcast on Saturday,
6 September 2008 at 1204 BST.



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