Homeowners at risk as mortgage benefit scheme faces axe

Published by Adam Williams on 09 October 2017.
Last updated on 09 October 2017

House, coins and a pen on a table

Homeowners who receive mortgage support payments from the government could be left in financial trouble after the free benefit scheme is withdrawn next year.

The Support for Mortgage Interest (SMI) scheme provides assistance to low-income pensioners and those who receive in-work benefit payments such as jobseekers allowance.

It helps these homeowners meet the cost of their monthly mortgage payment as a free benefit. However, from April 2018 the system will be changed so that any support will be in the form of a loan from government. This loan will need to be paid back when the property is sold in the future.

The Department for Work and Pensions says around 135,000 letters are being sent out to claimants with around 65,000 of these going to pensioners.

Those who have interest-only mortgages stretching into retirement are expected to be hardest hit by the new rules. Moneywise has reported throughout this year on the difficulties older borrowers are facing at the end of their interest-only term as many will not have enough to pay down the original capital.

In future these homeowners could have an SMI loan to repay as well.

Those affected have started to receive letters from the government advising them of the change, but the move has come in for criticism from those who say the new rules are not clear enough.

Insurer Royal London says the government has not published any clear information about the rate of interest SMI scheme users will be charged from April.

The government has only stated that it will issue further guidance by February 2018.

Helen Morrissey, personal finance specialist at Royal London, says: “Up until this point SMI has been paid as a free benefit but any payments made from April 2018 will now need to be repaid with interest – this is a massive policy shift.

“The government needs to make sure that people have the help and advice they need to decide whether or not to take out a second mortgage to pay for this. But instead, thousands of people are getting letters which miss crucial details such as the interest rate on the mortgage.”

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My son has a property on

My son has a property on mortgage. Why is this SMI benefit being withdrawn, when if my son rented a property for £600 a month, the £600 would be paid. This would eventually pay the LANDLORDS mortgage and interest, costing a lot more than the small amount my son(who has cancer and cannot work)presently receives. This is most unfair and an unnecessary new burden on his meagre existence.
THEY HAVE GOT THIS VERY WRONG AND IT NEEDS A RETHINK!

We are carers for our adult

We are carers for our adult son who has a severe a life long health condition. We helped him to buy a flat near our home so that he could have some independence and we were on hand to support him . The purchase was made with a Support for Mortgage Interest(SMI) benefit. The State provision of this type of mortgage to vulnerable people was cheaper than paying Housing benefit to private landlords. This was a win/ win situation. BY WITHDRAWING THIS BENEFIT THE GOVERNMENT HAS EFFECTIVELY BECOME A LOAN SHARK PREYING ON THE MOST VULNERABLE IN OUR COUNTRY. To fund the interest on their mortgages vulnerable people will either have to take out a loan with SERCO A PRIVATE COMPANY and PAY INTEREST ON THAT LOAN AS WELL AS INTEREST ON THE ORIGINAL MORTGAGE. IN EFFECT THIS IS INTEREST CHARGES ON INTEREST. IN OTHER WORDS LOAN SHARKING.THE OTHER ALTERNATIVE FOR VULNERABLE PEOPLE IS TO PAY INTEREST ON THE MORTGAGE FROM THEIR MEAGRE BENEFITS. THIS IS A LOSE/LOSE SITUATION FOR VULNERABLE PEOPLE THEY WILL END UP WITH EITHER EVER INCREASING DEBT OR GREATER PROVERTY. ON THE OTHER HAND SERCO IS IN A WIN/WIN SITUATION.
THE GOVERNMENT HAVE NOT SET AN INTEREST RATE FOR THESE SERCO LOANS IT HAS FAILED TO SAFEGUARD VULNERABLE PEOPLE FROM EXPLOITATION.
THE NUMBER OF VULNERABLE PEOPLE AFFECTED BY THIS LITTLE PUBLICISED BENEFIT CHANGE IS SMALL IN THE OVERALL SCHEME OF THINGS. THIS GROUP OF PEOPLE DO NOT INFLUENCE THE OUTCOME OF ELECTIONS. THE GOVERMENT IS EXPLOITING THEIR VULNERABILITY FOR VERY LITTLE MONETARY GAIN. THIS IS UNJUST AND UNFAIR.