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117,150 facing mortgage cliff edge

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Government plans to replace the benefits paid to help people pay their mortgage interest with repayable loans could cause real hardship, according to a Freedom of Information (FOI) reply obtained by Royal London.

The mutual insurer is calling on the government to delay the controversial changes until households have been given proper information to prepare for the change.

Official figures obtained by the insurer from the FOI request show that around 124,000 households currently receive regular benefit help with their mortgage interest payments or home improvements, including around 57,000 pensioners.

The government began contacting benefit claimants last July but not all have had the information yet with just 10 weeks to go until the deadline when help will be terminated.

Royal London first raised the alarm in October last year that government communications on Support for Mortgage Interest (SMI) changes were inadequate.

SMI, claimed by low income pensioners and the unemployed, which costs around £200m a year, converts to a loan after 6 April 2018. Just 6,850 households had signed up for the new loan scheme by 22 January, with another 18, 177 considering the move.

Benefit cessation and final reminder letters are due to be sent in February and March, the government confirmed.

After April any SMI payments will need to be repaid to the government with interest when the property is sold, transferred into new ownership or on the death of the recipient, or their partner.

Helen Morrissey, personal finance specialist at Royal London, said: “It is truly shocking that many thousands of low income families are yet to receive the information they need on the fact that their mortgage interest help could be switched off in just ten weeks time. If thousands of people fail to complete the process in time they could face real hardship and even potential repossession if they can no longer afford to meet their mortgage interest bills.”

Morrissey said the government must pause the policy implementation until more claimants have had all the information and are prepared for the loan conversion changes.

SMI is paid to homeowners in receipt of certain income-related benefits such as Jobseekers Allowance and Pensions Credit. Of those claimants, around 57,000 are of pension credit qualifying age while 67,000 are working age.

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