Budget change to Support for Mortgage Interest scheme

| June 23, 2010
”Budget

Yesterday’s emergency Budget contained a change to the Support for Mortgage Interest (SMI) scheme, which aims to give homeowners in financial difficulties time to find new employment or recover income, without the added stress of potentially losing their homes.

The scheme involves lenders reducing a borrower’s monthly mortgage payments by deferring interest, which can be settled at a later date once the borrower’s financial circumstances have improved.

The Government guarantees the lender against a proportion of any loss, should the borrower default.

Currently SMI should be paid at 1.58% above the Bank of England’s base rate but the SMI rate was frozen at 6.08% in late 2008, although interest rates have since fallen significantly.

Chancellor of the Exchequer, George Osborne, announced yesterday: “To put SMI on a more sustainable footing and to better reflect mortgage costs, SMI will be paid at the level of the Bank of England’s published Average Mortgage Rate from October 2010.”

In his Budget speech, the Chancellor also confirmed that a review the stamp duty land tax relief for first-time buyers will be taking place, to assess the impact of the tax on affordability and value for money.

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