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Borrowers shouldn’t have to wait 39 weeks for mortgage help

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Lenders are calling on the government to reduce the time struggling borrowers must wait for a Support for Mortgage Interest loan from the current 39 weeks to 13 weeks.

In a joint statement, UK Finance, which represents the banking and finance industry, and the Building Societies Association (BSA) are calling for the waiting time for eligibility to claim Support for Mortgage Interest (SMI) to be lowered to its original length.

This would mean borrowers wait for 13 weeks rather than the current 39-week period for claiming help to cover the cost of their mortgage.

The bodies are also calling for the government to extend the scheme to those on reduced hours and income, stating that “increased flexibility in SMI should not have any long-term impact on government expenditure”.

Support for Mortgage Interest changes

SMI is the help offered by the government to owner-occupiers in receipt of Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Universal Credit or Pension Credit.

The money helps homeowners unable to work or find work pay the interest on their mortgage, saving their homes from repossession and avoiding the additional cost to the taxpayer that would be incurred in the event of homelessness.

In April 2018 the government changed SMI from a benefit to a loan repayable in full which attracts interest. The current rate is 1.3%. The loan is repaid when the property is either sold or ownership transferred such as in the event of death.

SMI payments are made directly to the mortgage lender and can be claimed on up to £200,000 of mortgage (or £100,000 mortgage for those on Pension Credit).

In 2016, the government extended the waiting period in which the benefit was paid from 13 weeks to 39 consecutive weeks.  The exception to this is borrowers’ claiming Pension Credit, who are able to apply straight away for the benefit.

Paul Broadhead, head of mortgage and housing policy at the BSA, said: “Normal forbearance measures will continue to be in operation however long the pandemic persists, but we are also asking government to do their part, in the first instance by reducing the time that borrowers must wait for a Support for Mortgage Interest loan from the current 39 weeks to 13 weeks, adding to the options available, particularly for those who were in financial difficulty before the pandemic.”

A government spokesperson said: “We are committed to supporting people through the pandemic and beyond to ensure that nobody is left behind. That’s why we’ve introduced mortgage holidays, continue to provide loans for those on low incomes to help pay mortgage interest, and have paused home repossession until April.”

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