CML calls on govt to back borrowers
FINANCIAL ADVISER - 11TH APRIL 2002
The CML has called on the government to sue this year’s Budget to introduce a housing tax credit.
The Council of Mortgage Lenders said the credit was essential to stop a rise in property repossessions. But mortgage protection specialists said the move could hurt business as few people would take out mortgage payment protection insurance.
The CML said the tax credit would result in homeowners on a low income receiving a similar tax benefit to working families.
Simon Burgess, managing direct of mortgage protection specialist Burgesses, said: “IT will mean some loss of revenue for brokers selling PMI, particularly at the lower end of the market.”
The tax credit would come as part of changes to the 1995 benefit reforms brought in by the Tories.
The CML said the move had weakened the safety net for borrowers, with the prospect of a significant increase in repossessions if economic conditions worsen.
The reform extended the waiting period for entitlement to benefit help with mortgage interest to 39 weeks. Previously, the first payments would come after eight weeks, covering 50%, increasing to cover the full mortgage interest after a further 18 weeks.
Peter Williams, deputy direct general of the CML, said: “Although it is right to put the onus on borrowers to protect themselves, not all events are insurable. This is why the government, lenders and insurers much continue to work together to create sustainable homeownership.”
The sale of private insurance has been of the increase since monitoring began in 1998 and the average take up of mortgage payment protection insurance in now 29%. For unskilled workers, the take up is 26%.
However, direct government support to help borrowers with mortgage interest payments declined from £1.2bn in 1993 to £500m in 2000.
Simon Burgess said: “From an ethical perspective, if it cuts down on repossessions a change could be a good thing for the country as a whole, particularly if the economic climate worsens.”
The CML also wants the government to overhaul stamp duty to benefit those on lower incomes by introducing a sliding scale structure similar to income tax.
