Thinking of remortgaging? If you fear losing your job you need to act now to beat the October clampdown on state interest payments

This is not the weather in which to be making substantial financial decisions. But if you are thinking of taking on a mortgage, or indeed remortgaging, you need to do it immediately if you want to beat the October deadline for cuts in state help for jobless borrowers.

Mortgages taken out after 1 October will attract severely reduced mortgage interest benefits where a borrower is claiming income support. And with the average mortgage taking roughly six weeks to complete there is no time to waste if you think you may lose your job in the future.

At present homeowners on income support - a means-tested benefit which provides financial help if you are not in paid work and your other income is below certain levels - can claim mortgage interest benefit. This benefit pays half of the mortgage interest on loans up to pounds 100,000 for the first 16 weeks of the claim and the full amount after that. After the first 16 weeks the benefit is paid direct to the lender.

After 1 October the benefits paid to existing borrowers will be reduced No benefit will be paid for the first two months of a claim, after which half the interest will be paid direct to the lender for the next four months. After six months the interest will be paid in full, again direct to the lender.

But if you take out a new mortgage after 1 October your benefits will be severely curtailed. No mortgage interest will be paid for the first nine months of a claim. After nine months the interest will be paid in full direct to the lender.

It is also worth remembering that when the interest is paid it will be at the standard rate. This may be less than the rate which the borrower is required to pay. For example, where a borrower has fixed at a relatively high rate of interest there could be a shortfall.

The new rules, brought in by the Secretary of State for Social Security, Peter Lilley, to save an estimated pounds 1bn a year, have been widely blamed for keeping the housing market pinned firmly to the floor.

The changes came in for fierce criticism from the Social Security Advisory Committee, which demanded a range of urgent concessions, including continuing state protection for part-time staff, people over 55, divorcing couples, seasonal workers and homeowners who switch lenders to get a better rate of interest.

These suggestions were firmly resisted by Mr Lilley who insisted that the insurance industry should provide the safety net where the state had pulled out.

However, there is no evidence that insurers will have suitable sickness, accident and redundancy policies in place by the October deadline. Many are still waiting for firm guidelines from the Association of British Insurers.

Lending figures published by the Building Societies Association yesterday showed a further weakening of the housing market in July. "The low levels of activity reported by estate agents, along with continued house price falls, underline the enduring malaise in the market,'' said Adrian Coles, director general of the BSA.

He urged the Government to make a commitment to homeowners to help restore some of the confidence required for the housing market to recover.

Meanwhile, the financial plight of an estimated 1.5 million borrowers was again highlighted this week when the High Court ruled that a couple threatened with repossession by Halifax Building Society should be allowed to sell their property on the open market and deduct the transaction fees from the proceeds.

Mr Justice Evans Lombe dismissed Halifax's argument that it could not sanction the sale of the property in South London unless it received the entire proceeds and the conveyancing fees were met from another source. The judge said that repossessed homes usually fetch less when sold by lenders rather than owner/occupiers and that Halifax was likely to receive more if the couple, who have negative equity of pounds 74,000, sold on the open market.

Despite the High Court victory the message for borrowers is limited. Borrowers are still liable for the transaction costs whether they are met from the sale proceeds or added to the outstanding loan.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
footballA colourful discussion on tactics, the merits of the English footballer and rebuilding Manchester United
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
News
i100
Finacial products from our partners
Property search
Sell it with flowers: competition is 'intense' for homes with outside spaces

Gardens add a tenth to the value of your home

A London estate agent yesterday put a price on having a garden. David Pollock of Greene & Co reckons it can increase a property's value by a tenth.

Spectators at the Isle of Wight music festival watch the World Cup on the big screen. Betting promotions were a feature of the tournament
Lenders have been accused of persuading vulnerable people to borrow expensive credit

Payday loan firms accused of bombarding vulnerable people with nuisance phone calls

Payday loan firms have been accused of bombarding financially vulnerable people with nuisance phone calls, after a debt charity reported that a third of its clients were plagued by the messages.

The foundation proposed that the Government sets up a scheme to help people avoid losing their homes

Mortgages: 'Homeowners could trade down to shared ownership to defuse rate rise timebomb'

A plan to defuse a “mortgage debt timebomb” when interest rates rise is published today amid warnings that 2.3m households could struggle with their repayments.

Current accounts are too costly and confusing, says CMA as it announces investigation into Britain's biggest banks

Competition regulator to investigate market where it's hard for customers to make comparisons and the big banks' charges can be set too high
All the signs have been pointing up for buy-to-let, but there are clouds on the horizon

Buy-to-let: is it a boom or a bubble fit to burst?

People borrowing to be landlords could face the same restrictions as homebuyers, with MPs voicing fears that property speculation may be overheating the market

Moment of truth for payday lenders: Watchdog plans to curb cost of short-term loans

The chief of the City watchdog, Martin Wheatley, spoke exclusively to The Independent's Simon Read about its attempts to control the worst excesses of unscrupulous high-cost credit companies

Consumers given power to choose a green deal

How would you like to be able to choose how your electricity is made and even where it come from? It may sound futuristic and fanciful but the independent supplier Co-operative Energy has made it a reality this week.

'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers

City regulator says existing customers suffer worst rates

Motor insurers divided on proposals for whiplash ban

MPs want medical evidence for claims. Will this bring higher premiums?

British Gas repays £1m for mis-sold deals

British Gas was yesterday forced to pay back £1m to its customers after mis-selling them energy deals.

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Project Manager (HR)- Bristol - Upto £400 p/day

    £350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

    Graduate / Trainee Recruitment Consultant - IT

    £25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

    HR Business Partner - Banking Finance - Brentwood - £45K

    £45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

    PA / Team Secretary - Wimbledon

    £28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

    Day In a Page

    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
    How live cinema screenings can boost arts audiences

    How live cinema screenings can boost arts audiences

    Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
    Shipping container hotels: Pop-up hotels filling a niche

    Pop-up hotels filling a niche

    Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
    Native American headdresses are not fashion accessories

    Feather dust-up

    A Canadian festival has banned Native American headwear. Haven't we been here before?
    Boris Johnson's war on diesel

    Boris Johnson's war on diesel

    11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
    5 best waterproof cameras

    Splash and flash: 5 best waterproof cameras

    Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
    Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

    Louis van Gaal interview

    Manchester United manager discusses tactics and rebuilding after the David Moyes era
    The children were playing in the street with toy guns. The air strikes were tragically real

    The air strikes were tragically real

    The children were playing in the street with toy guns
    Boozy, ignorant, intolerant, but very polite – The British, as others see us

    Britain as others see us

    Boozy, ignorant, intolerant, but very polite
    Countries that don’t survey their tigers risk losing them altogether

    Countries that don’t survey their tigers risk losing them

    Jonathon Porritt sounds the alarm
    How did our legends really begin?

    How did our legends really begin?

    Applying the theory of evolution to the world's many mythologies
    Watch out: Lambrusco is back on the menu

    Lambrusco is back on the menu

    Naff Seventies corner-shop staple is this year's Aperol Spritz