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CML warning over Govt mortgage aid

Extending the qualifying period for state help with mortgage payments has cut Government spending but put homeowners in a more vulnerable position, says the Council of Mortgage Lenders.

In its first study of the Government&#39s 1995 benefit reforms, which extended the waiting period for entitlement to assistance with mortgage interest payments, the CML warns that any growth in unemployment would increase the number of repossessions.

The CML says the reforms are yet to be tested by a significant economic downturn and if this happens the full knock-on effect on homeowners will be felt.

The research shows that the Government has cut the annual cost of state help with mortgage interest payments to about £500m in 2000 from £1.2bn in 1993.

But the CML says it doubts the Government&#39s argument for reform that its benefit system was hampering the development of private sales of mortgage payment protection insurance.

The CML says MPPI has become more popular but this is mainly a result of better products, pricing and higher consumer awareness than benefit cutbacks.

It is in talks with the Government about giving tax relief in the form of a tax credit to homeowners who cannot afford insurance and are not entitled to the housing benefit that tenants renting property receive. It believes this is one way of providing a safety net for vulnerable homeowners.

Deputy director general Peter Williams says: “Some poorer homeowners may not be able to afford insurance and are not entitled to the housing benefit available to tenants. The introduction of a housing tax credit would remove a bias that means that homeowners on low incomes are protected. That is why the Government, lenders and insurers must continue to work together.”

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