This week’s Emergency Budget included a change for the Support for Mortgage Interest scheme (SMI).
All over the UK, everybody has awaited the Emergency Budget with baited breath – knowing it would be painful for us all but hoping it might not be as painful as expected. The Budget did not disappoint and the SMI scheme was included in the changes.
The SMI scheme was devised to help homeowners suffering from financial troubles and give them time to find a new job or form of income without burdening them with the added strain of potentially losing their property.
Under the SMI scheme, the lender defers interest so the borrower can pay a reduced monthly mortgage payment in the meantime. The interest is to be repaid once the homeowner’s financial circumstances have improved again. The Government also acts as guarantor, guaranteeing the lender against part of the loss if the borrower defaults.
SMI was always set at 1.58 percent over the Bank of England (BoE) base rate, however, the interest rate was frozen in 2008 at 6.08 percent. Since then, interest rates have fallen. In the Budget, George Osborne announced:
“To put SMI on a more sustainable footing and to better reflect mortgage costs, SMI will be paid at the level of the Bank of England’s published Average Mortgage Rate from October 2010.”
In other points of interest to mortgage advisors and first time buyers, the Chancellor confirmed that the stamp duty land duty tax relief will also be reviewed in order to assess its impact on value for money and affordability.