The Government has all but abolished a valuable piece of the welfare state designed to support vulnerable homeowners in just over a year, new figures have revealed.
A Freedom of Information request* by mutual insurer Royal London shows that just 1,030 homeowners made new claims for Support for Mortgage Interest (SMI) between April 2018 and July 2019, less than a third of a total 3,580 who became eligible for support during the period.
The figures underline the extent to which use of this benefit has crumbled since the Government introduced swingeing changes to the scheme in April last year by replacing the benefit with a loan that has to be repaid.
About 18 months ago, 100,000 unemployed, sick or elderly homeowners were getting help towards their mortgage interest costs from the Government. The most recent official figures showed this had fallen to 20,000 almost overnight following the introduction of the changes.
The latest Royal London FOI shows a mere trickle of new claimants, amid rising repossessions (see notes to editors).
Before April last year, SMI was paid as a free benefit covering the interest on mortgages for those claiming benefits such as Pensions Credit, Income Support and Universal Credit.
After April 2018, the Government introduced a rule that the benefit would be paid as a loan and would need to be repaid when the property was sold or transferred into new ownership, including for existing claimants.
Becky O’Connor, personal finance specialist at Royal London, said:
“In less than two years, the Government has effectively dismantled part of the welfare state. The low interest rate environment may mean that the Government has been able to make the changes without too much short term impact, but without this support, any kind of strain on mortgage affordability, from losing a job or going off sick, may mean that thousands of homeowners find themselves on the fast track to repossession.”
Notes to Editors
- * FOI 25166 from the Department for Work and Pensions available on request
- There was a 39 per cent rise in mortgage possession claims in April to June 2019, compared to the same quarter last year, according to the latest figures from the Ministry of Justice.
About Royal London:
Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.