11th hour change to Support for Mortgage Interest could hit vulnerable families, warns BSA

Posted On: 
22nd March 2018

Time is rapidly running out for many Support for Mortgage Interest (SMI) recipients before their debt worsens and stress levels rise, says BSA.

This is likely to be a change that has a long tail with affected families coming to constituency surgeries says BSA.

On 5 April 2018, the Support for Mortgage Interest (SMI) benefit will be changed to a second charge loan.  DWP via Serco has issued thousands of letters and made thousands of telephone calls to the circa 135,000 benefit recipients to let them know what is going on and what signing up to an SMI loan entails.

Despite this, only just over 10,000 households have opted to switch to an SMI loan, a further 16,000 are considering their options, and have 6 weeks to do so.  A group of around 28,000 have so far declined to take out the loan. The hope for them is that they have made their decision because they have the financial means to make up the shortfall.

Whichever way you look at it though there are still up to 80,000 households who for whatever reason have either not yet engaged or in the case of around half of them have not yet been contacted.

Time is rapidly running out and shortly after Easter their mortgage lender will stop receiving the monthly direct benefit payment which pays the mortgage interest on loans up to £200,000.  For some it is the one payment which is stopping a bad financial situation spiralling downwards into serious arrears.

During this communication process, building societies have also been reaching out to their own borrowers on SMI to talk to them about their plans.  We are not in a position to advise on whether they should take out the SMI loan or not, but can and have been discussing with as many as possible the alternatives that they have.  However, the first a lender will know whether a borrower has taken, declined or not engaged with this process is when the monthly payment stops (or not) after April 5.  

DWP has identified c2,500 benefit recipients as vulnerable and is taking separate steps to assist them via the Court of Protection.  We believe that many thousands more are actually vulnerable, whether by virtue of their age, financial stress or other factors such as limited financial capability. 

It is impossible to know whether these multiple thousands of families have made no decision on the loan because they can’t or because they won’t. This doesn’t really matter right now as time is rapidly running out.  In a positive step DWP has recently confirmed that current claimants can opt to take out an SMI loan at any time after 5 April and have their payments backdated.  In a letter sent on 9 March, we suggested to the Minister, Kit Malthouse MP, that an implementation delay of 6 months would be sensible.  This would allow more time for engagement with these families before their debt worsens and stress levels rise.  A situation that can only be exacerbated, if as anticipated, the Bank Base Rate rises in May.

Whatever happens next, this is likely to be a change that has a long tail with affected families coming to constituency surgeries.  


Are you an MP or a constiuent looking for more information? There are a number of places you can get information and support:

- The government website for an overview of SMI and the changes involved.
A Commons Library briefing
Support and guidance from: Citizens Advice, Money Advice Service, Shelter

Alongside National Debtline the BSA has produced a guide for those having difficulty paying their mortgage.  A digital version of Can’t pay your mortgage? is on the BSA website and printed copies are available from the BSA on request. Contact Kate Creagh at kate.creagh@bsa.org.uk.