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80,000 could lose mortgage interest support following policy change

Cherry Reynard
Written By:
Cherry Reynard

More than 80,000 could have support for their mortgages cut off as part of changes to the Support for Mortgage Interest (SMI) scheme, latest official figures reveal.

Of 103,000 entitled to support, only 18,000 have opted to continue to receive SMI under a new loan arrangement that came into force from 6 April. Those who do not take up the loan arrangement no longer receive help with their mortgage payments. So far, 42,000 have declined to take up the new loan option while 12,000 are undecided.

SMI had previously been paid as a free benefit covering the interest on mortgages and some home improvement loans for those claiming benefits such as Pensions Credit, Income Support and Universal Credit. This changed in the summer 2014 Budget when it was announced that payments made after 6 April 2018 would need to be repaid when the property was sold or transferred into new ownership. In other words, it became a loan rather than a free payment.

Mutual insurer Royal London has called on the government to delay the changes and it stated the process has been dogged by communication delays.

Further, the latest figures issued by the Department for Work and Pensions (DWP) showed that successful phone contact had only been made with 72,000 people claiming the relief. No telephone contact had been attempted in the case of 4,000 claimants. Telephone contact is essential as claimants’ loan offers are made over the phone.

Helen Morrissey, personal finance specialist at Royal London, said: “We have repeatedly called on government to reconsider its approach and these figures demonstrate the point. The changes to SMI came in from 6 April and yet these figures show the government has yet to speak to some 30,000 claimants about the changes and only 18,000 have said they will take up the loan option.

“As it stands well over 80,000 people may now lose their mortgage support and we have no idea what strategies they have in place to meet these payments. The likelihood is that we will see people start to default on their mortgage payments. The government must put a brake on these changes to ensure these people are engaged with and helped to make an informed decision. Otherwise these people face disastrous consequences.”

A DWP spokesperson, said: “Over time, someone’s house is likely to increase in value, so it’s reasonable that anyone who has received financial help towards their mortgage should be asked to pay that back.

“People who sign up to the loan will continue to get help with their mortgage interest and it is only repayable if there is available equity when the property is sold.

“If people decide to decline the loan now but change their mind in future the loan can be backdated so in effect there would be no break in payments.

“We have already contacted everyone currently in receipt of SMI to explain the change but we are making sure people have time to review the documents, obtain advice and consider their options.”

DWP added that ‘vulnerable’ claimants, such as those with dementia, severe mental health or with learning difficulties have until 4 November to make a claim under the new loan system.

For everyone else, they have six weeks to claim from when they received their loan offer over the phone, which should have been in the last month.