As the Government introduces a new working families tax credit regime, the Council of Mortgage Lenders (CML) has highlighted both the low take-up of previous schemes, and the differing stance taken by lenders assessing their benefit. Although not specifically designed to cover housing costs, the new tax credits provide a boost to mortgage borrowers with low and moderate incomes.
The CML pointed out that hundreds of thousands of homeowners are failing to claim tax credits which are high enough to meet the monthly payments on an average mortgage. One-in-five households are eligible for tax credits of more than £60 a week and are failing to claim, according to the CML.
A poll of 31 lenders, encapsulating 85% of the mortgage market, found that two thirds of lenders will take account of tax credits for new applications, although some had qualifications such as lower LTVs or lower income multiples. The majority of lenders did not see advice on this matter as their remit, but half drew attention to it in their literature and referred clients to citizens advice bureaux.
The Chelsea Building Society is one lender that does not take the credits into account as a form of income. Jeremy Hicks, corporate affairs controller at the Chelsea, explained: ‘Arguably the only time someone would lose a tax credit would be on an increase in salary, which is a positive thing, but we take the position that it is not a guaranteed figure because the Government could take the benefit away in the future. The only benefit we tend to take as guaranteed is permanent disability benefit.’ The CML does not have a position or view point over what lenders should do.
Sue Anderson, head of external affairs at the CML, said: ‘I am not sure that we will be taking a position. What we are trying to highlight is the differences among lenders to make sure it is thought through. It may be legitimate for lenders to differ in view, but not through lack of thought. With half the poor being home owners, and the credits available up to a £58,000 income in some cases, this is a big issue.’
To date home-owners account for more than £1bn of unclaimed tax credits per year.