Thousands of households who receive government support to help them pay their mortgages are facing hardship as a benefit scheme closes in April, with few people yet to sign up for its replacement.
The Support for Mortgage Interest (SMI) scheme helps low-income pensioners and people who receive in-work benefit payments, such as jobseekers allowance, meet the cost of their monthly mortgage payments.
As Moneywise reported last year, from April 2018 the current free benefit will be replaced by a loan from government. This loan must be paid back when the property is sold in the future.
However, according to a freedom of information (FOI) request by insurer Royal London, as of 22 January 2018, just 6,850 households had signed up to the new loan scheme. This is a small proportion of the 124,000 households which currently receive the free benefit.
Royal London is now calling on the government to delay the introduction of the loan scheme until more households are signed up for its replacement.
It says many people have yet to receive detailed information about their options after April. Those who have not agreed to join the new loan scheme will have their SMI payments stopped when the scheme ends.
Helen Morrissey, personal finance specialist at Royal London, says: “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 10 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. The Department for Work and Pensions should pause the implementation of this policy until it is confident that everyone has had full information about the changes and the time and support to make an informed decision.”
The Department for Work and Pensions told Moneywise: “We are contacting all SMI claimants to explain the change and to signpost them to independent advice. This change provides a safety net to help people stay in their homes and avoid repossession.
"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 if there is available equity when the property is sold.”
It says the policy will save around £190 million per year.