31 January 2018

New FOI reply reveals ‘time running out’ as over 100,000 households face having mortgage lifeline cut

5 min read

Helen Morrissey, Personal Finance Specialist
Helen Morrissey

Corporate PR Specialist – Long Term Savings


Government plans to replace the benefits paid to help people pay their mortgage interest with repayable loans could cause real hardship according to a Freedom of Information reply obtained by Royal London. The company is now calling on the Government to delay the controversial changes until households have been given proper information about what is planned.

Official figures show that around 124,000 households currently receive regular benefit help with their mortgage interest payments, including around 57,000 pensioners.

Letters and information booklets started to be sent out from last July. These are to be followed up by telephone calls so recipients can ask questions. This process is still ongoing with the DWP saying that “not all SMI claimants have been contacted as yet.”

But DWP has now admitted that as at 22nd January 2018 just 6,850 households had signed up for the new loan scheme. Those who do not agree to move over to the loan scheme will have their mortgage help terminated in April.

Helen Morrissey, personal finance specialist at Royal London said:

“It is truly shocking that many thousands of low income families are yet to receive the information they need on the fact that their mortgage interest help could be switched off in just ten weeks’ time. If thousands of people fail to complete the process in time they could face real hardship and even potential repossession if they can no longer afford to meet their mortgage interest bills. The DWP should pause the implementation of this policy until it is confident that everyone has had full information about the changes and the time and support to make an informed decision’.


Support for Mortgage Interest (SMI) is paid to homeowners in receipt of certain income-related benefits such as Jobseekers Allowance and Pensions Credit. It covers the interest payments on mortgages and some home improvement loans.

Currently there are approximately 124,000 SMI claimants. Around 57,000 are of Pension Credit qualifying age while 67,000 are working age.

It has been paid as a free benefit but after April any SMI payments will need to be repaid to the government with interest when the property is sold, transferred into new ownership or on the death of the recipient (or their partner).

The Department for Work and Pensions (DWP) started sending letters out to those affected last year advising that they could either choose to take up the loan option or stop receiving the support. However, the DWP says that not all existing SMI claimants have been contacted as yet.

In its most recent FOI reply to Royal London, the DWP said that as of 22 January only 6,850 claimants have agreed to take up the loan with a further 18,177 saying they might take up the loan option. However, there are currently around 124,000 SMI claimants in total. The FOI reply says that the ‘vast majority’ of communication so far has been to pensioners, suggesting that very few of the 67,000 working age families have been contacted to find out how they want to proceed.

Where a claimant is undecided they will be sent a call summary with a reminder following six weeks later if the forms had not been returned. Benefit cessation and final reminder letters are due to be sent in February/March.

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For further information please contact:

Helen Morrissey, Corporate PR Specialist – Long Term Savings

Notes to editor

Extracts from FOI replies received from DWP, most recently on 24th January 2018.

How many letters will you send to recipients of Support for Mortgage Interest highlighting the fact it is to be converted from a free benefit into a loan?

There are currently around 124,000 claimants of SMI all of whom will receive a letter and a booklet notifying them of the transformation of SMI from a benefit to a loan. The booklet includes information on what will happen next and who to contact for help and advice. Claimants will then receive a call to undertake an Informed Discussion about SMI as a loan. Claimants then have the opportunity to agree, consider or decline the loan. They can subsequently change their mind at any time.

How many of the recipients are pensioners and how many are of working age?

Currently there are around 57,000 SMI claimants who are of Pension Credit qualifying age and around 67,000 who are of working age.

How many SMI recipients have elected to take up the option of claiming SMI and repaying it as a loan?

Where a claimant agrees or wishes to consider the loan further the appropriate letter and documentation is issued for completion. Should they subsequently agree to a loan claimants are asked to return the relevant documentation within six weeks.

The Department started to provide information about SMI loans via Serco to low numbers of existing claimants in the first few weeks. There was then a break for one week to assess progress.

The roll out programme for Informed Discussions is still ongoing and not all existing SMI claimants have been contacted as yet. Of those who have been contacted, the vast majority are Pension Age claimants.

Figures as of 22 January 2018 show that 6,850 claimants had agreed to the loan, with 18,177 claimants saying that they might take a loan, as part of the Informed Discussion.

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.