Mortgage benefit changes put borrowers at risk of losing their homes

August 26, 2017 by Brendan O'Neill

Borrowers

Experts warn that impending changes to mortgage benefits could result in homeowners finding themselves in high levels of debt, or even losing their home.

Support for Mortgage Interest (SMI), also known as Help with Housing Costs, will soon be changed, and will become a loan rather than a benefit. Around 140,000 households currently claim the benefit, but from April 2018, the Department for Work and Pensions will no longer pay the benefit. According to experts, some of the most vulnerable in society will face huge levels of debt, and even repossession.

The benefit currently provides help to homeowners who are claiming income related benefits, pensioners or those who are unemployed. From April next year, the benefit will be replaced with a loan, which will be secured on the property. Once the home is transferred to another owner, or sold, or the owner dies, the loan has to be repaid, along with daily interest charges.

Although the DWP has started writing to clients, awareness of the changes is limited. Although the original government consultation took place in 2011, it only resurfaced during the 2015 Budget. This year, when the Loans for Mortgage Interest Regulation 2017 was passed, the government also finalised the plans for scrapping SMI.

Speaking to a CeMAP qualified mortgage advisor before you get a mortgage may help buyers to reduce the financial risks later on.

According to Shelter, the waiting period to apply for SMI has been increased from 13 to 39 weeks, making it much harder for homeowners to retain their home.