Government reviews mortgage support for benefit claimants

Jan Harris | December 7, 2011 | 0 Comments

The government has announced a review of its Support for Mortgage Interest scheme (SMI), which helps people receiving certain benefits if they are finding it difficult to pay their mortgage interest.

SMI, which is available to people on benefits such as Income Support, Income-based Jobseeker’s Allowance and Pension Credits, costs the Government around £400 million annually.

It helps prevent home owners having to either sell their home or have it repossessed if they are unable to meet their interest payments.

Currently, the maximum SMI payment is £139 per week for mortgages of up to £200,000 and interest is paid at the Bank of England’s published average mortgage rate.

The government has now launched a consultation amid concern that SMI is being used as a long-term option, rather than as short-term help while homeowners resolve their difficulties.

It believes that the system is unsustainable in its current form and is considering whether the taxpayer should be able to recoup some of the costs of the scheme.

There is currently no limit on how long SMI can be claimed by people on income support, pension credit or employment and support allowance, and views are being sought on whether a charge should be levied on a property after the owner has received SMI for a specified period of time.

The homeowner would have to give up some of the proceeds of a sale of the property in order to pay back this charge to the taxpayer.

There is already a limit of two years for certain people on jobseeker’s allowance to claim SMI and one option being considered is whether this limit should be extended to all people on jobseeker’s allowance.

Lord Freud, Minister for Welfare Reform, said: “We are committed to supporting homeowners to stay in their own homes when times are hard.

“But in the future this type of support must be fair and affordable so we are seeking views from experts and the wider public, including options for putting a charge on the homes of future claimants so when they sell up we can recoup some of the costs.”

Recent research indicated that difficulty in securing a mortgage, and the high costs involved, are making people less excited about the prospect of owning their own home.

The possibility of a reduction in support for property owners who fall into difficulty can only dampen enthusiasm even further.