The lawyers warn that many of the affected families have very serious borrowing issues often having ‘maxed out’ on both secured and unsecured credit facilities. The result is that child benefit may be all that is keeping some families afloat financially.
For example, a family with a household income of £45,000, two children under the age of 16 and a stay-at-home partner could be over £1,700 worse off per year. That is equivalent to a loss of gross earnings of over £2,900 (6.5% of total income). If we consider that in terms of mortgage commitments it represents three months payments, assuming a mortgage of £140k at 5%.
Paul Walshe, partner and head of lender services, Moore Blatch, said:
“I fully appreciate the Government’s position with regards to cutting costs and, on the face of it, cutting child benefit for the better off is eminently sensible.
"However, whilst it is easy to assume that households on that level of income can absorb this level of cut back without having any profound consequences, the reality that we see from our cases, is that many of the families that will be affected are running a financial tightrope, and the only thing keeping them out of possession is the low interest rates and access to benefits.
"Public sector employees are rightly concerned about pay freezes eroding their disposable income by the rate of inflation but the cut will be much deeper for many middle-class families who will lose their child benefit unless the government compensates those families with stay at home parents in other ways.”
