The government has announced a 7% cap on social housing rents next year as part of Chancellor Jeremy Hunt’s autumn statement, as well as reducing the time Universal Credit applicants have to wait to get a loan to help cover mortgage interest payments.
Under the existing rules, the government regulates the amount of social housing rents which can increase each year.
Prior to the announcement, rents were expected to increase by the rate of the Consumer Price Index (CPI) plus 1%, meaning potential increases next year would have been 11%.
The government has introduced additional support to help households struggling with rising rents and mortgage payments
In October, CPI inflation jumped to 11.1%, its highest level in 41 years, from 10.1% the previous month.
But following the announcement, rents for social housing can only increase by a maximum of 7% in 2023-2024.
This will save the average social housing tenant £200 over the next year and generate an overall saving for the government of around £630m over 5 years, according to the statement’s calculations.
According to the social housing regulator, around 3.5 million households live in social housing, representing around 84% of all affordable and low-cost rental housing.
Social housing providers have come under fire after a two-year-old boy died of a respiratory condition caused by prolonged exposure to mold in his family flat provided through social housing. The flat was part of a block owned by Rochdale Boroughwide Housing (RBH).
The devastating case has sparked outrage and brought to light the conditions social housing tenants sometimes have to endure.
Responding to the government announcement, Kate Henderson, chief executive of the National Housing Federation, said:
“Housing associations are keenly aware of the financial pressures facing their residents.
“The sector has pledged that no tenant will be evicted due to financial hardship when engaging with their housing association. Each housing association has also put in place bespoke support to help residents struggling with the cost of living.
“We are also very pleased that the government has announced an exemption from the rent cap for supported housing providers, which will ensure the future sustainability of care and support for some of the most vulnerable people in the country.
“The overwhelming majority of tenants who use these specialist services will have their rent increase fully covered by housing benefit or universal credit.”
In addition, the housing associations have also committed to capping rent increases for those using the condominium scheme at 7%, to match the social rent cap.
More help for mortgagees on Universal Credit
In addition, in the face of the sharp rise in interest rates, the government announced support for holders of mortgage loans benefiting from universal credit.
From the spring of next year, people with Universal Credit will be able to apply for a mortgage interest support loan to help pay off interest after three months of claiming, instead of nine.
The government will also abolish the zero income rule to allow claimants to continue to receive support while they are working and on Universal Credit.
Mortgage interest support: who is eligible?
Mortgage Interest Support is a government loan available to people who receive:
- Universal Credit
- Income support
- Income-Based Jobseeker’s Allowance
- Employment and Income Support Benefit
- Pension credit
Those who receive Income Assistance, Income-Based JSA, or Income-Based ESA cannot get an SMI loan until they apply for it for 39 consecutive weeks.
From spring 2023, recipients of Universal Credit will need to have claimed it for 3 consecutive months to be eligible, instead of 9.
Receiving a tax refund or statutory sickness benefit, maternity benefit, paternity benefit, adoption benefit or shared parental benefit may disqualify you.
The government says you might still be able to get an SMI loan if you apply for one of the eligible benefits, but can’t get it because your income is too high.
How mortgage interest assumption works
The SMI used to be a non-refundable benefit, but it is now 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 interest up to £200,000 on your loan or mortgage, and the The interest rate used to calculate the amount of assistance you will receive is currently 2.09%.
Borrowers must repay with 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 pay off the loan.
The interest you pay may go up or down, but the rate will not change more than twice a year. The current rate is 1.4%.
You will repay the SMI loan from what is left over after you have paid off your mortgage and any loans secured by your home.
If you do not have enough money left to repay the entire SMI loan, the remainder of the loan will be written off.
What happens to mortgage rates?
Fixed rate mortgages have started falling since last month after rising sharply
Mortgage rates have risen dramatically since the September mini-budget. Even though they have started to fall, fixed rates are still significantly higher than they were in the summer.
Prior to the Friday, September 23 mini-budget, the average two-year fixed rate across all loan-to-value tranches was 4.74% and the five-year fixed rate was 4.75%, according to Moneyfacts.
Rates now stand at 6.22% and 6.03% respectively, having both fallen since the November 3 base rate announcement.
The impact is brutal. More than a quarter of mortgage holders would not be able to pay their monthly repayments if they increased by £100 a month, according to new research from Citizens Advice.
Almost half (45%) would be unable to make their payments if they increased by £250 a month, the organization said.
In September, 49% of mortgage holders whom Citizens Advice gave debt advice said they had more money flowing out of their finances each month than they were coming in.
Are you old and anxious about bills?
Age UK is urging older people to call its free national advice line on 0800 169 65 65.
Their staff will check that you receive everything to which you are entitled, including pension credit and care allowance.
Find out more about Pension Credit here, or call Age UK who will help you apply.
Age UK adds that energy suppliers have a duty to offer support if people are struggling with bills or debt, and you can apply for an affordable repayment plan.
Learn more here about dealing with skyrocketing energy bills and here for energy saving tips.
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