The government has announced a 7 per cent cap on social housing rents next year as part of Chancellor Jeremy Hunt’s Autumn Manifesto, as well as reducing the time Universal Credit claimants have to wait for a loan to help cover mortgage interest payments.
Under current rules the government regulates the amount of increase in social housing rents each year.
Prior to the announcement, rents were to be increased by the Consumer Price Index (CPI) rate plus 1 percent – meaning potential increases next year would have been 11 percent.
The government has provided additional subsidies to help families struggling with increased rents and mortgage payments
In October, consumer price inflation jumped to a 41-year high of 11.1 percent, up from 10.1 percent the previous month.
But after the announcement, social housing rents will only be able to rise by a maximum of 7 percent in 2023-24.
This would save the average social housing tenant £200 next year and would generate a total savings for the government of around £630m over 5 years, according to the calculations in the statement.
There are about 3.5 million households in social housing, which is about 84 percent of all affordable rent and low-cost homeownership, according to the Social Housing Regulatory Authority.
Social housing providers are under fire after a two-year-old boy died of a respiratory illness caused by prolonged exposure to mold in his family’s apartment provided through social housing. The flat was one in a building owned by Rochdale Boroughwide Housing (RBH).
This devastating case has caused outrage and highlighted the conditions social housing tenants sometimes have to endure.
Responding to the government’s announcement, Kate Henderson, chief executive of the National Housing Federation, said:
Housing associations are keenly aware of the financial pressures their residents face.
The sector has pledged that no tenant will be evicted due to financial difficulties as they deal with their housing association. Each housing association has also designed a dedicated subsidy to help residents struggling with the cost of living.
We are also pleased that the government has announced a rent cap relief for subsidized housing providers, which will ensure the future viability of care and support for some of the country’s most vulnerable people.
“The vast majority of renters who use these specialized services will have their rent increase covered entirely by Housing Benefit or Universal Credit.”
In addition, housing associations have also committed to covering a rent increase for those using the shared ownership system of 7 per cent, to match the social rent cap.
More help for universal credit mortgage holders
In addition, in the face of a sharp rise in interest rates, the government announced its support for mortgage holders who receive universal credit.
Starting next spring, those with universal credit will be able to apply for a mortgage interest loan to help pay off the interest three months after claiming, instead of nine.
The government will also scrap the zero-earnings rule to allow claimants to continue receiving support while working and on universal credit.
How does mortgage interest subsidy work?
SMI used to be a non-repayable feature, but now it is a loan that must be repaid.
The payment you receive will only cover the mortgage interest, not the amount you borrowed or any arrears.
You can usually get help paying the interest on up to £200,000 of your loan or mortgage, and The interest rate used to calculate how much help you will receive is currently 2.09 percent.
Borrowers need to pay back with interest when their home is sold or transferred, although the loan can be transferred to another property.
The government cannot force you to sell your home in order to pay off 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’ll pay off the SMI loan out of what’s left after you pay off the mortgage and any loans secured against your home.
If you do not have enough of the loan to pay off each SMI loan, the remainder of the loan will be written off.
What happens to mortgage rates?
Fixed rate mortgages have been declining since last month after they had risen sharply
Mortgage rates have risen dramatically since the mini budget in September. Although they are starting to decline, flat rates are still much higher than they were in the summer.
Before the Friday, Sept. 23 mini budget, the average two-year fixed interest rate across all loan-to-value categories was 4.74 percent, and the five-year fix was 4.75 percent, according to Moneyfacts.
The two rates now stand at 6.22 percent and 6.03 percent, respectively, having both fallen since the base rate announcement on November 3.
The effect is stark. More than a quarter of mortgage holders wouldn’t be able to afford their monthly repayments if they increased them by £100 a month, according to new research from Citizens Advice.
The organization said nearly half (45 per cent) would not be able to make their payments if they went up by £250 a month.
In September, 49 percent of Mortgage Advice holders gave Citizens Debt Advice to say they have more money going out of their finances each month than going into it.
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