Your Money > Loans > Personal Loans: What the lender doesn't tell you

They owe you

by Sarah Modlock

9 March 2005

You might expect the government to give every possible support to hard working homeowners. Not a chance. Instead of encouragement, homeowners have lost out in every direction. Council tax has shot up and Stamp Duty now rakes in three times as much for the Chancellor as it did when he first came to office. Tax relief on mortgage interest has been abolished and inheritance tax has been raised only in line with retail prices inflation, catching out thousands of homeowners, year after year.

Help with housing costs has increased for private and social sector tenants but reduced dramatically for home-owners since the early 1990s, resulting in discrimination against homeowners in the current benefit regime. This is one of the observations made by Professor Steve Wilcox in this year's edition of the UK Housing Review published by the Council of Mortgage Lenders. The review observes that back in 1990/91, the combination of welfare benefits, tax reliefs, grants and subsidies to home-owners totalled around £9.3 billion. But by 2002/03, this had dropped to just £933 million - a startling 90% reduction compared to the 113% increase for tenants. Homeowners now receive just 6%of the total help with housing costs.

Under pressure

Since 1997, Britain has 1.2 million additional homeowners. But despite interest and mortgage rates dropping to historical lows, low inflation and low unemployment, homeowners are struggling to keep up their mortgage payments. Court actions for home repossessions have reached their highest level for nearly six years according to Department for Constitutional Affairs (DCA). Although a large proportion of these actions do not result in full repossession, they indicate that many people are finding it hard to make ends meet.

Five interest rate rises in 15 months have damaged homeowners' ability to keep up payments on their mortgages as short-term arrears increase. And the CML, whose members provide nearly all mortgages in the UK, said that arrears were expected to rise this year as the full impact of higher rates fed through to all borrowers. By 2007, the CML predicts, about 130,000 homeowners will be in arrears, although this is still low by historical standards. CML director general Michael Coogan says that lenders are trying to prevent repossession actions depriving people of their homes by extending mortgage terms or encouraging full use of benefits and tax credits.

The claim game

It's time to ask not what you can do for your country but what your country can do for you. More than £3 billion worth of benefits lie unclaimed in the Treasury's coffers each year. Around £1 billion of this is council tax benefit and housing benefit and millions of people are also missing out on the new pension credit, attendance allowance and the new child and working tax credits. It could be that people don't want the hassle, cant face the paperwork or feel there is a stigma attached to claiming. But it is more likely that most people have no idea what they are eligible to claim. Even higher-earning, working families can stretch their finances with tax credits and benefits:

Council tax benefit could offset the constant hikes - up to 30% a year in some places. More than 6.5 million people are eligible to claim it but only 2 million do including more than half of eligible homeowners plus hundreds of thousands of pensioners. This could be down to the grim form-filling required. But if you earn less than £116.90 a week as an individual or £175 a week as a couple, you may get the maximum benefit of as much as 100% of your bill. Incomes above these levels attract progressively smaller amounts of benefit and those with savings of more than £16,000 are excluded. Consult your local Benefits Agency for details.

Tax credits have had lots of free publicity because of the mess that was made of the administration on claims. But even with the higher profile there are an estimated 600,000 families not getting the money they qualify for. Savings are not taken into account when assessing the size of credits. Working Tax Credit is aimed at those on lower incomes. You also need to be working at least 16 hours a week. Most parents - even higher rate taxpayers - are eligible for monthly Child Tax Credit payments in addition to any Child Benefit. The opportunity to claim this tax credit is often overlooked by parents but nine out of 10 families qualify for it. The value of the credit depends on how much you earn and payments are slightly higher for children under the age of one. Start claiming the Child Tax Credit within three months of your child's birth.

With all tax credit claims, the Inland Revenue Tax Credit Helpline can confirm your eligibility and how much you will receive and also send you the relevant forms. Call 0845 300 3900.