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Mortgage Costs

Volume 229: debated on Thursday 22 July 1993

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To ask the Secretary of State for Social Security what measures are being taken against people in Wales receiving benefit to cover their mortgage costs who failed to inform his Department when their payments dropped; and if he will make a statement.

The administration of social security is a matter for Mr. Michael Bichard, the chief executive of the Benefits Agency. He will write to the hon. Member with such information as is available and a copy will be placed in the Library.

Letter from Michael Bichard to Mr. Rod Richards, dated 21 July 1993:

As Chief Executive of the Benefits Agency it is my responsibility to answer questions about relevant operational matters. I am therefore replying to your recent Parliamentary Question to the Secretary of State for Social Security, asking what measures are being taken against people in Wales receiving benefit to cover their mortgage costs who failed to inform his Department when their payments dropped; and if he will make a statement.

I acknowledge that administrative difficulties have arisen for some customers who have chosen to obtain a mortgage which is reviewed annually. Such 'annual review' mortgages are arranged by the mortgage lender so that, although the interest being charged to the borrower's account may change in the course of the year, the repayments that the borrower is required to make are not adjusted to reflect this until the end of the lender's accounting year.

Although Income Support (IS) may include an amount to cover mortgage interest payments, it is calculated with reference to the rate of mortgage interest being charged to the customer's loan account.

Since mortgage interest payments on 'annual review' mortgages are not calculated on this basis there can, in certain circumstances, be a difference between the amount of IS paid compared with what the lender would expect to receive under the annual review arrangement. The Benefits Agency has held meeting with the Council of Mortgage Lenders about this difficulty. In the meantime, mortgage lenders will normally look sympathetically at requests from customers to be taken off the annual review arrangement. My advice to customers who find themselves in difficulty would be to immediately contact their mortgage lender to discuss the situation.

However, it remains the responsibility of the customer to inform the Benefits Agency of any changes in their circumstances. This includes any change in the rate of interest charged to their mortgage account.

A customer residing in any part of Great Britain, who fails to inform the Department of a decrease in their rate of mortgage interest can be asked to repay the IS overpaid.

I hope you find this reply helpful. A copy of this letter will appear in the Official Report and a copy will also be placed in the Library.