Ahead of the Government’s spending review later this month, the Chancellor George Osborne has announced plans to withdraw child benefit from higher-rate taxpayers from 2013 – a move that will affect an estimated 1.2 million households.
Currently available to everyone, the child tax benefit gives parents £20.30 a week for their first child, and £13.40 a week for any other children. For a family with two children, that equates to a benefit of £146 a month, or just under £1,800 a year.
Losing that money will be a blow to many families, but if you’re a homeowner then your mortgage could come to the rescue. With interest rates still at all-time lows, many borrowers have the opportunity to switch their mortgage to a cheaper deal and cut their monthly repayments.
By knocking 1% of their mortgage rate, someone with a £180,000 interest only mortgage could save themselves £150 a month, or £1,800 a year – more than compensating for the loss of child benefit.
David Hollingworth, L&C’s Head of Communications, says, “This change to child benefits is not due to take effect for another two years, but with other spending cuts in the pipeline, there’s a real incentive for borrowers to take control of their finances and make sure they’re not paying too much for their mortgage.”
“Whilst there’s little we can do about some of the spending cuts being announced by the Government, borrowers do have a say over the mortgage rate they pay and many people could be paying less than are. The same goes for other debts and outgoings such as credit cards and utilities - getting the best deals across these products could really help to offset changes such as the proposed child benefit cuts. “
"And if you’re concerned about the impact that any spending cuts might have on your finances, then you could consider fixing your mortgage rate to protect you against interest rate rises.”
To see if you could save money on your current deal, try L&C’s One minute mortgage check – simply tell us how much you currently owe, your mortgage rate (or monthly payment) and how much your house is worth and we’ll tell you instantly if we think we can save you money.
If you can’t switch now because you're tied in with Early Repayment Charges, our Mortgage Prompt service will remind you – via text or email – when it’s time to review your deal.