Early Christmas Present

We received more good news in the housing market this week. The Government has announced that as a result of the downturn, families experiencing a significant loss of income or redundancy will be able to defer a proportion of their interest payments for up to two years while they get their family finances back on track. This initiative, in addition to the change in help given to people who have lost their jobs, having interest payments being paid for, now after three months unemployment rather than nine months, and up to £200,000 covered, is forming one big mortgage protection policy for the whole country.

If for some reason you manage to get into trouble even with all the help available above, then at least you will have the comfort of knowing that lenders appear to be queuing up to defer repossession proceedings for up to six months. Then if all else fails the government have announced they are bringing forward their mortgage rescue scheme. This scheme is a £200 million programme that will allow homeowners either a shared equity option, enabling monthly mortgage payments to be reduced in return for giving up a share of their property. Or you can stay in the property as a tenant having sold your property to a housing Association and pay a subsidised rent.

Although these measures are being put into place I would urge people to think twice before cancelling protection policies as most of the help appears to revolve around redundancy. I believe that once the economy has stabilised it could become politically embarrassing as well as expensive to continue with such generous schemes. The costs could eventually be seen as a tax on the retired who have no mortgage and who feel they have not contributed to the situation we find ourselves in.

Not content with early Christmas presents from Mr Brown and Mr Darling, the Bank of England have joined in the festivities and gifted the housing market a further 1% rate cut. This makes the Bank rate the lowest since the Second World War. Unfortunately Scrooge, in the shape of the Halifax in particular, have not extended goodwill to all men and have not passed on the full rate cut. I believe that as we are in exceptional times that they should be encouraged to pass on the cut. As an incentive perhaps savers should be able to deposit up to say £20,000 this year in tax free ISAs with lenders that pass on the full rate cut. If this action were taken not only would it benefit the housing market, but it would ensure that savers who pay tax are being compensated for their loss in interest rates. This would also enable more people to get the Christmas they deserve.

Kieron Bassett Financial Services have two IFAs. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com/cms.

Kieron Bassett CertPFS
9 December 2008

Mortgage Assistance

The pre-budget report stated some measures which may help, but there was one measure which will definitely help those who find themselves out of work, and was not highlighted by the media.

 

You can’t fail to read or hear of the rapidly rising number of redundancies due to our economic slowdown.  Without redundancy protection you would have 9 months of mortgage payments to find before the Government would help to ease the burden.  The Government at that time would pay your mortgage interest (upto 6%) on your debt upto £100,000.  However, following the pre-budget report, from April the Government will pay your interest (upto 6%) after only 3 months, upto debts of £200,000.

 

On the face of it this partially takes away the need for redundancy cover.  However, what most people do not realise is that the interest is only paid on the amount of money you borrowed to buy the property.  For example, if you bought a house 10 years ago and borrowed £50,000.  The interest will be paid on the £50,000, not on any additional monies you have since that time.  Also the Government will only pay the interest upto a maximum of 6%.  Therefore your mortgage would not be being repaid.  Crucially, if the mortgage is joint and one party continues to work, no payments are made by the Government.  This excludes a significant proportion of claims.

 

Redundancy protection can be as cheap as £28 per month for £1,000 per month of cover and can be paid after you have been redundant for 30 days.  The policy can last for either 12 or 24 months.  You can protect your monthly mortgage payment inclusive of mortgage related insurances and also extra to assist with maintaining your standard of living.  The policy can either be taken out in one name or joint names. 

 

This type of policy is simple to set up and can be in force immediately.  However, bear in mind that most firms have an exclusion period where they will not pay out if you are made redundant within the first three months.  However, many firms offer free cover for the first three months of the policy. 

 

You should review your redundancy protection arrangements regularly.  An Independent Financial Adviser (IFA) will advise you on the most appropriate protection arrangements for your needs.

 

Kieron Bassett Financial Services have two IFAs.  Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com/cms.

 

Adam Elkin CertPFS

1 December 2008