Government to change Universal Credit rules to allow recipients to save for a deposit
The prime minister has unveiled plans to change the rules around Universal Credit to make it easier for those receiving the benefit to save for a deposit to buy a home.
Under further details put forward following Boris Johnson’s ‘Benefits to Bricks’ speech, the government has vowed to remove some of the restrictions currently placed on Universal Credit recipients in order to help them save money.
Under the current rules, anybody who receives Universal Credit sees their payment tapered when their level of savings exceeds £6,000 and then stops entirely when that reaches £16,000.
Under the new plans, the government will exempt lifetime ISA savings from these rules, which means those in work can begin to save towards a deposit without their Universal Credit payments being reduced.
Work and pensions secretary Thérèse Coffey said this would incentivise people receiving benefits to save and give them the option of putting income to a mortgage rather than into a landlord’s pocket.
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Additional support will also now be given to people who own their homes but lose their jobs or see their income reduced significantly. This will come in the form of a shorter window for the Support for Mortgage Interest (SMI) scheme, which allows people to remain in their home by just paying off the interest on their mortgage for a period of time.
This currently kicks in after nine months but will now be cut to kick in after six months.
In his speech today, Mr Johnson focused on three areas in which he is taking action to boost homeownership. This included extending the Right to Buy to housing association tenants, which he said would give nearly 2.5 million households the option to own a home.
Mr Johnson vowed to work closely with the sector over the coming months to come up with a system that would see one home built for every social home taken out of stock.
In addition to this, he also wants to make it easier for people in council properties to buy their homes and reinvigorate the council Right to Buy scheme, which has seen numbers drop significantly in recent years.
To do this, Mr Johnson will change welfare rules to allow those on housing benefit to have the option to pay this towards a deposit on a property rather than on rent.
He also promised to carry out a full review of the mortgage market to assess what mechanisms can be put in place to make it easier for younger generations to buy properties. A report on this will be published in the autumn.
Mr Johnson said: “For four decades it has been possible for council home tenants to use a discount to buy the property they live in.
“Over that time, almost two million people have been helped into homeownership.
“They have switched identities and psychology, from being dependent on the state for every repair – from damp-proofing to a new front door – to being in charge of their own family home, able to make improvements and add value as they please.”
He added: “We have a ludicrous situation whereby plenty of younger people could afford to make monthly mortgage payments – they’re earning enough to cover astronomical rent bills – but the ever-spiralling price of a house or flat has so inflated deposit requirements that saving even just 10% is a wholly unrealistic proposition for them.”
