The government has announced a 7 percent cap on rentals for social housing next year as part of Chancellor Jeremy Hunt’s Autumn Declaration, as well as reducing the time universal credit applicants must wait to obtain a loan that help cover mortgage interest payments.
Under existing rules, the government regulates how much rents for social housing can increase each year.
Prior to the announcement, rents were expected to rise at the Consumer Price Index (CPI) rate plus 1%, meaning potential increases next year would have been 11%.
The Government has introduced additional support to help households struggling with rising rent and mortgage payments.
In October, CPI inflation jumped to a 41-year high of 11.1 percent, from 10.1 percent the previous month.
But after the announcement, rents for social housing will only be able to increase a maximum of 7 percent in 2023-24.
This will save the average social housing tenant £200 next year and generate overall savings for the government of around £630m over 5 years, according to calculations in the statement.
According to the Social Housing Regulator, about 3.5 million households are in social housing, representing about 84 percent of all affordable rental housing and low-cost housing.
Social housing providers are under fire after a two-year-old boy died of a respiratory condition brought on by prolonged exposure to mold in his family apartment provided through social housing. The flat was one in a block owned by Rochdale Boroughwide Housing (RBH).
The devastating case has caused outrage and highlighted the conditions that social housing tenants sometimes have to endure.
Responding to the government announcement, Kate Henderson, CEO of the National Housing Federation, said:
‘Housing associations are well aware of the financial pressures their residents face.
‘The sector has pledged that no tenant will be evicted due to the financial hardship they are engaged in with their housing association. Each housing association also has personalized support to help residents struggling with the cost of living.
‘We are also very pleased that the Government has announced a rent cap waiver for assisted living providers, which will ensure the future viability of care and support for some of the most vulnerable people in the country.
“The overwhelming majority of renters who use these specialized services will have their rent increase covered in full by housing benefits or universal credit.”
In addition, housing associations have also pledged to cap the rent increase for those using the shared ownership scheme at 7 per cent, to match the social rent cap.
More aid for those mortgaged in universal credit
In addition, given the sharp increase in interest rates, the Government has announced that it will support mortgage holders who receive universal credit.
Starting in the spring of next year, those with universal credit will be able to apply for a Mortgage Interest Support loan to help with interest payments after three months of claiming, instead of nine.
The Government will also abolish the zero income rule to allow applicants to continue receiving support while working and at Universal Credit.
Support for Mortgage Interest: Who qualifies?
Mortgage Interest Support is a government loan available to people who receive:
- universal credit
- income support
- Income-Based Job Seekers Allowance
- Income-Related Employment and Support Allowance
- pension credit
those who receive Income Support, Income-Based JSA or Income-Based ESA cannot get an SMI loan until they have claimed it for 39 weeks in a row.
Beginning spring 2023, those who receive Universal Credit will need to have claimed it for 3 months in a row to be eligible, instead of 9.
Receiving a tax refund, statutory sick pay, maternity pay, paternity pay, adoption pay, or co-parent pay may disqualify you.
The government says you may still be able to get an SMI loan if you apply for one of the qualified benefits, but you can’t get it because your income is too high.
How the Mortgage Interest Support works
SMI used to be a non-refundable benefit, but now it is a loan that must be repaid.
The payment you receive will only cover the interest on the mortgage, not the amount you borrowed or any arrears.
You can usually get help paying interest on up to £200,000 of your loan or mortgage, and the The interest rate used to calculate the amount of aid you will receive is currently 2.09 percent.
Borrowers must pay interest when they sell or transfer ownership of their home, although the loan can be transferred to another property.
The government cannot force you to sell your home to repay the loan.
The interest you pay can go up or down, but the rate won’t change more than twice a year. The current rate is 1.4 percent.
You will repay the SMI loan with what is left over after you pay off your mortgage and any loans secured against your home.
If you don’t have enough left to pay off the entire SMI loan, the rest of the loan will be paid off.
What is happening with mortgage rates?
Fixed-rate mortgages have started to fall since last month after rising sharply
Mortgage rates have increased dramatically since the mini-budget in September. Even though they have started to fall, fixed rates are still significantly higher than they were in the summer.
Before the mini-budget on Friday, September 23, the average two-year fixed rate across all loan-to-value tranches was 4.74 percent and the five-year fixed rate was 4.75 percent, according to Moneyfacts.
The rates now sit at 6.22 percent and 6.03 percent respectively, both having fallen since the base rate announcement on November 3.
The impact is strong. More than a quarter of mortgage holders could not afford their monthly payments if they were increased by £100 a month, according to new research from Citizens Advice.
Almost half (45 per cent) could not make their payments if they increased by £250 a month, the organization said.
In September, 49 percent of Citizens Advice mortgage holders gave debt advice and said more money was coming out of their finances each month.
Are you older and anxious about bills?
Age UK urges older people to call their free national advice line on 0800 169 65 65.
Your staff will verify that you are receiving everything that corresponds to you, including the pension credit and the assistance subsidy.
Find out more about the pension credit here or call Age UK who will help you apply.
Age UK adds that energy providers have a duty to offer support if people are struggling with bills or debt, and you can ask about an affordable payment plan.
Read more here on how to deal with sky-high energy bills and here for energy-saving tips.
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