One new law helps people meet their mortgage payments, and another aids care leavers on income support. But, Gary Vaux says, the devil is in the detail
Two new pieces of social security legislation – one on mortgage interest and another that relates to care-leavers and other young people who are estranged from their families – were designed to help people but are not quite as generous as they first appeared.
The government made changes to the rules about help with mortgage interest to help people effected by the recession. The waiting period before you qualify for any help with your mortgage if you’re on benefits was to be slashed from 39 to 13 weeks. In addition, help would be available for the interest repayments on mortgages of up to £200,000, double the previous limit.
However, the new rules are forcing some lone parents and other claimants in part-time work to give up work.
Problem in the wording
The problem lies in the wording of the law, which says a person has to be in receipt of income support at the start of their waiting period. If not, they have to wait 39 weeks and will only receive help on the first £100,000 of their mortgage.
The trouble is, in this recession, a number of people are having their working hours cut to below 16 hours a week. This means that, although they are technically able to claim income support, their wages from part-time work mean they will fail to qualify for payment until their mortgage interest is added.
So logically, you’d think they’d have to wait 13 weeks, have the mortgage interest added into their claim, and then their home would be secured. Wrong!
Tracey is a lone parent and used to work 25 hours a week. With her wages, working tax credit and child tax credit, she could just about cope with her £120,000 mortgage. When her firm reduced her hours to 14 hours a week she lost her working tax credit. So she claimed income support.
She knew she wouldn’t qualify straight away, as her remaining wages still left her above the income support level. But she thought that, after 13 weeks, her income support would kick-in because of the addition of mortgage interest. Sadly not. Tracey faces another 26 weeks’ wait and, even then, will only receive help with the interest on £100,000 of her loan.
Tracey gives up work altogether in order to qualify for benefit straight away. This means she only has 13 weeks to wait and will receive help on all £120,000 of her mortgage. Congratulations to the DWP for creating yet another disincentive to work!
The change for “estranged” young people, which includes many care-leavers, is also one that looks better on the surface than when you dig a bit deeper.
The amendment, which takes effect from this month, covers income support entitlement for all young people who are in relevant full-time non-advanced education and who are also “estranged” from their parents or persons acting as parents. For this group, income support will now be available up to their 21st birthday.
The drawback is that the young person must have been enrolled or started their course before their 19th birthday, which negates the impact for many.
Gary Vaux is head of money advice, Hertfordshire Council. He is unable to answer queries direct. If you have a question contact him here