Government must reconsider 'ill-designed' changes to Support for Mortgage Interest
Changes to Support for Mortgage Interest (SMI) are causing extreme stress to already vulnerable individuals, penalising homeowners for changes to their circumstances that are beyond their control, says Angela Crawley MP.
When people become disabled during their working life – for example, blindness through occupational hazard, or a genetic illness that flares up later in life – it can disrupt their lives in profound ways, often making them unable to work.
A new disability will not take into account a person’s life plans, and I believe the government has a responsibility to try to stabilise these people’s lives in new circumstances. Recent changes to the government’s Support for Mortgage Interest scheme means the safety net to help these people keep their homes is being eroded.
Taking out a mortgage over several decades is always a risk, and most people would never dream on signing the papers that a disability may one day affect their ability to pay. Yet with around 170,000 claimants of Support for Mortgage Interest as of 2016 figures, this issue is widespread and affects a significant percentage of homeowning families in the UK.
The government had offered Support for Mortgage Interest as a benefit to homeowners in hardship until 5th April 2018. This covered the interest payments on their mortgage only, while the amount borrowed, insurance policies and arrears would be paid by the homeowner. In practice, for disabled claimants, this would mean scraping the money together from their Employment Support Allowance or Personal Independence Payment benefits.
Since April, the government has stopped this support as a benefit, but instead are offering a loan, to be paid back with interest. This is repaid when the home is sold or ownership is transferred, or when the homeowner dies, making the sale of the house more costly and difficult for a claimant or members of their family.
Figures contained within the Office for Budget Responsibility’s Economic and Fiscal Outlook said that while all current claimants had been contacted regarding the change only around 10,000 claimants have so far agreed to take up the loan. According to the document this is “90 per cent short of the 100,000 expected by the end of 2018/2019.”
Many people wary of taking out the loans due to this aspect of the policy and the effect it may have on their future house sale. Many constituents have also approached me about the fact the loans will be delivered by Serco – a company exposed in the Paradise Papers as having “a history of problems, failures, fatal errors and overcharging.”
This may cause many people to sell their unaffordable homes and move into the rented sector. In doing so, many would be eligible for housing benefit. This would in fact cause extra expense to the taxpayer: the average Support for Mortgage Interest claimant under the pre-April rules received around £1,800 per year, whereas the average housing benefit claimant receives around £5,000.
The government has labelled this a cost-saving exercise, and claims it is done in the name of fairness.
In a letter from DWP Minster Kit Malthouse, “the Government believes that it is right that, when they can, homeowners should repay this financial help they receive from taxpayers to accrue an asset, which may increase in value over time,” however it comes at the cost of forcing people to take on the repayments of a new and unforeseen loan.
At the same time, housing benefit can be paid to private landlords, who are able to pay their mortgages from taxpayer money given to tenants in receipt of housing benefit, without any of the associated requirements to repay.
This change in policy is causing extreme stress to already vulnerable individuals in addition to forcing them to pay interest from benefits which are designed to cover basic costs of living. I am calling for the government to pause and reconsider this ill-designed policy change and make sure they do not penalise homeowners for changes to their circumstances that are beyond their control.
Angela Crawley is SNP MP for Lanark and Hamilton East.