Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

BSA, UK Finance call for changes to SMI

SMI

UK Finance and the Building Societies Association are asking the government to permanently reduce the wait time to access SMI from 39 weeks to 13 weeks

The Building Societies Association and UK Finance are calling for changes to Support for Mortgage Interest (SMI) to help struggling homeowners.

The trade bodies say critical changes to SMI are needed to make sure hundreds of thousands of households are helped before their financial situation deteriorates.

As it stands, struggling homeowners are left to wait 39 weeks to claim SMI.

UK Finance and the BSA are now asking the government to permanently reduce the wait time to access SMI from 39 weeks to 13 weeks, and to allow people on Universal Credit to claim SMI if they are working reduced hours.

Mortgage lenders have provided around 2.9 million mortgage payment deferrals to help homeowners who were struggling because of Covid-19. However, emergency support measures are coming to an end and although lenders have other forbearance measures available to help those still struggling, SMI is a vital support option.

Recent research from the Social Market Foundation suggests that only 30% 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.

People must receive benefits such as Job Seekers Allowance (JSA) or Universal Credit (UC) to be eligible for SMI. But as people move from JSA to UC the zero-earnings rule means they are no longer able to get SMI if they receive any income from work.

One in ten homeowners said it was difficult to keep up mortgage payments in the last year, with the top reasons including being furloughed or on reduced pay (34%) and working fewer hours (31%), The English Housing Survey found.

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. In addition, as SMI is a loan not a benefit, it does not need to be treated like other UC payments.

Paul Broadhead, head of mortgage and housing policy at the BSA, 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. With SMI already restructured as a loan rather than a benefit, reducing the wait time and making the scheme more flexible would not only provide a compassionate response to those financially impacted as a result of the pandemic, it shouldn’t have a long-term impact on government expenditure.

He said: 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.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.