Homeowners need housing benefit too

Homeowners need housing benefit too

Reposessions are already increasing in number, and as job losses escalate the situation can only get worse.

So far, those with repayment problems have taken on more debt than they can cope with while earning. But as figures published by the government on Wednesday show, the next 'knock-on' effect of the credit crunch - rising unemployment - is taking over at a frightening rate.

When you are still earning, it is difficult, but not impossible, to negotiate with your lenders about repayments. But how do you do this when you have lost your income?

One of the legacies left by the last Conservative government was a reduction in the benefits paid to homeowners who lost their jobs. Before October 1995, provided you were entitled to jobseeker's allowance, you could claim help for half your mortgage interest after eight weeks, and the full interest after 18 weeks. Under these rules, lenders agreed not to repossess properties where mortgage payments were missed, provided the homeowner would be eligible for state help after a few weeks.

But the Tories changed all this: the vast majority of homeowners who bought their homes or remortgaged after 1 October 1995 do not qualify for help for nine months (though they do then get full interest payments) after losing their jobs. This is much too long for lenders and they have scrapped the no-repossession agreement.

There are some exceptions that entitle you to come under the old rules - for example, if you.....continued below

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are HIV positive or a single parent who has been abandoned, or you have an insurance policy that should cover your mortgage but will not pay out for some reason. But most homeowners will not fall into these categories.

It's hard to see what the government can do to stop the UK's decline into recession, with the ensuing property slump, unemployment and repossessions. But it can do something to help those who find themselves affected: improve the benefits for homeowners so they approach, or even match, those provided to tenants, who get housing benefit to cover their rent from day one.

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