Thousands face hardship as mortgage benefit scheme set to close

31 January 2018

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.


In reply to by Contax (not verified)

What about carers who have given up work to look after someone in the family who is sick and disabled? Carers save the government millions of pounds every year doing a job that would otherwise have to be funded by local council services. They get paid a paltry sum of money £62.70 weekly. The real irony of our situation is if we lose our mortgaged home because of this change to the mortgage support from the dwp we will have to move into rented accommodation which will cost our local authority tens of thousands in adaptations suitable for a powered wheelchair user and housing benefit for paying the rent. I do not think this has been thought through at all.

In reply to by anonymous_stub (not verified)

Typical Tory policy - designed to increase homelessness of low wages/children. No doubt there will be a huge stock of repossessed houses for Tory MPs and their donors to stock up on at the expense of the poor and those who have fallen on hardship!

In reply to by anonymous_stub (not verified)

The Tory MPs just love this - come a couple months after April they'll have a huge stock of homes to stock up on and rent out for more profit!

In reply to by saphire phoenix (not verified)

Totally agree with you - it's a disgraceful change: Typical Tory policy - take everything away from the poorest and most vulnerable! Homelessness will rocket after this is implemented - it already has. The figures they give for number of homeless is no doubt double/triple what they actually release - why tell the truth when a lie is good enough to fool their voters and the gullible!

In reply to by anonymous_stub (not verified)

This should have happened years ago, why should tax payers who are having to pay their own mortgage have to pay towards other peoples mortgages for them to benefit. Any payments loaned should be reclaimed on sale of property, once equity in property reduces the property should be sold so the debt never goes above the value which would put tax payer at a loss. Expect less will want to keep the house knowing they have to pay it back so may be more homes on the market. I know someone who split up and her and child lived in shared house on odd occasions just to get benefits but stayed at her mothers house just visiting house they shared for a couple of nights occasionally, why should this be allowed.

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