The Council of Mortgage Lenders (CML) trade body said a long period of declining rates across the market had caused the reduction in the support for mortgage interest (SMI).

Borrowers who receive support from the government include the elderly and disabled.

At present the rate of support is 3.63% but this will be cut to 3.12% on July 6.

The current rate had been in place since October 2010, when it was lowered from 6.08%. The CML said support for mortgage borrowers in trouble was generally lower than tenants who receive housing benefit.

Figures for 2013 showed there were 230,000 borrowers receiving financial support, with 94,000 of these payments made to older borrowers.

“Over the years, support from SMI has kept in check the number of cases of possession,” the CML said.

“This was particularly helpful in the aftermath of the financial crisis. Even with the additional costs, this may have been a more attractive option for the government than increased homelessness and higher payments of housing benefit to former owner-occupiers moving into rented accommodation following possession of their home.

“Declining borrowing rates are about to trigger the first reduction in almost five years in the rate at which SMI is paid to borrowers experiencing payment problems.

“Over the years, successive governments have recognised the benefits of supporting borrowers going through a period of financial difficulty. The extent of state support has varied over time, but it is typically less generous than payments to tenants who are unable to pay their rent in full.”