Benefit crackdown will mean fewer mortgages

MANY of the 1.5 million people currently claiming sickness or invalidity benefit will find it increasingly difficult to get a mortgage because of the Government's crackdown on benefit next year.

The Department of Social Security is to merge the two benefits into one, called incapacity benefit, and tighten up the medical that someone must pass to be eligible.

The Government's aim is to try and cut down on the amount of benefit it pays out each year. Many people will be denied the benefit, and many more will be paid reduced amounts.

Because of the uncertainty over the benefit, would-be borrowers will find it difficult to get it counted as income when lenders assess how much they can borrow.

Each of the big lenders operates a slightly different policy when it comes to offering mortgages to people on sickness or invalidity benefit.

At the moment, many require a letter from the Department of Social Security confirming that the benefit is going to continue to be paid. Some will treat each application on its merits.

A Barclays Bank spokesperson said: 'We are a responsible lender. Obviously it is not in the customer's interest to give them a mortgage that they cannot in the future afford to pay. Because of the uncertainty surrounding the benefit, we would almost certainly ask anyone applying for a mortgage to wait to see what happens.

'If the income of the person decreases, then it would not be in their interest to take out a mortgage.'

Halifax Building Society said that the stricter regime governing benefit for ill health would make a difference to its lending policy.

A spokesperson for the society said: 'It is not something that we can make a blanket statement about. But the tightened-up requirements are certainly going to complicate matters.'

Nationwide Building Society said that it considered each case on it merits.

A spokesman said: 'If it is topping up somebody's income, then it can be included. We have not essentially changed our policy.

'We still have to make an assessment about whether the benefit is going to continue to be paid.'