Government Help

More help needed for struggling homeowners

Christina Hoghton
Written By:
Christina Hoghton

Support for Mortgage Interest is a vital lifetime, but it needs major reforms to be able to help struggling homeowners

Mortgage lenders are calling on the government to offer more support to struggling homeowners as emergency support measures are coming to an end.

Support for Mortgage Interest (SMI) helps struggling homeowners every year, but they are left to wait 39 weeks before they can claim it, which could make their financial situation worse.

The Building Societies Association and UK Finance are calling for changes to SMI to help these homeowners to avoid their financial situation deteriorating by getting help sooner.

The two organisations are asking the government for two key changes:

1. Permanently reduce the wait time to access SMI from 39 weeks to 13 weeks to make sure help is given when people need it most.

2. Allow people on Universal Credit to claim SMI if they are working reduced hours.

Why the changes are needed

Mortgage lenders have provided around 2.9 million mortgage payment deferrals to help homeowners who were struggling because of Covid-19.

But these emergency support measures are coming to an end and, although lenders can help those struggling in other ways, SMI is a vital support option.

Research suggests only 30 per cent of households have enough savings to pay their mortgage for two months, but the wait time for those eligible to claim SMI is currently nine months. This means homeowners could accumulate more than six months arrears before they receive much-needed support making it significantly harder to manage and resolve their financial difficulties.

Also, as people move from Job Seekers Allowance (JSA) to Universal Credit (UC) the current zero-earnings rule means they are no longer able to get SMI if they receive any income from work. Lenders are calling for the zero-earnings rule to be removed from the SMI eligibility criteria, so that people can work up to 16 hours a week without it affecting their SMI claim.

Paul Broadhead, head of mortgage and housing policy at the Building Societies Association, said: “Lenders, government and regulators have collaborated well during the Covid-19 pandemic to ensure support has been available to mortgage holders who have experienced financial difficulties.

“However, as the end of these schemes is now in sight and unemployment looks set to rise sharply, without some further action the risk of home repossession could become a reality for many families and individuals despite the best efforts of lenders.

“To support struggling homeowners as they adjust to their new normal, modifications to the Support for Mortgage Interest scheme are needed now.

“Without the reforms we are recommending, we expect more government funding will be required for the provision of housing benefits for former homeowners who were unable to get the financial support they needed, when they needed it.”