Lilley removes 'safety net' of mortgage aid

Click to follow
The Independent Online
The Government yesterday went ahead with two controversial housing changes - effectively forcing new mortgagees to take out private insurance to cover the first nine months of unemployment and making changes to housing benefit which could cut payment to those renting privately.

Peter Lilley, Secretary of State for Social Security, turned down most of the recommendations from his independent Social Security Advisory Committee (SSAC) aimed at mitigating the mortgage interest change. He declared: "It is part of the Government's strategic aim to encourage personal responsibility wherever possible."

He has, however, accepted that carers, people with a pre-existing medical condition or HIV, remand prisoners and those whose claim is due to recent desertion or widowhood will be treated as existing rather than new borrowers.

From 1 October, new borrowers will have to wait nine months before income support will meet their payments. For existing borrowers there will be a two-month wait, followed by four months when half of the interest due will be paid. Insurance companies and building societies are now likely to try to sell cover to most of the 10.5 million people with mortgages.

Donald Dewar, Labour's social security spokesman, called on Mr Lilley to think again, saying the proposals will "add to the troubles of many families". The housing charity, Shelter, said to remove this "vital safety net" when 130,000 homeowners were teetering on the brink of repossession was "irresponsible".

The change is likely to cost many borrowers pounds 20 a month for cover, and Mr Lilley conceded in his reply to SSAC that too few good insurance products are yet on the market. He expressed optimism that they would be produced in time, however, as Roger Evans, his junior minister, said: "We believe that these measures will result in high quality comprehensive insurance available to all borrowers." That would provide better protection when 70 per cent of homeowners are not entitled to state help when unable to work.

Mr Evans said the changes would ensure "every homeowner addresses the question of how they will cope when times get hard" - thus preventing repossessions.

The housing benefit changes mean rents will no longer be met in full where local authorities decide a rent is higher than the average in the area. The aim is "to encourage tenants to economise on housing costs", a measure Shelter said will "force vulnerable households into lower quality, insecure accommodation".

Mr Evans said: "Taxpayers should not foot the bill for higher rents and higher income for landlords."

But Nicholas Winterton, the Tory MP for Macclesfield, said: "I cannot support this measure. It throws fresh doubt on the Conservative Party's commitment to home ownership. The housing market is likely to remain flat. This will not help."

Comments