The government has been warned that proceeding with planned changes to the mortgage interest support offered to struggling borrowers could cause ‘real hardship’ for more than 100,000 households.
The government has been warned that proceeding with planned changes to the mortgage interest support offered to struggling borrowers could cause ‘real hardship’ for more than 100,000 households.
Around 124,000 households currently receive regular benefit help with their mortgage interest payments according to official figures.
Up to now Support for Mortgage Interest (SMI) has been paid as a free benefit to people on certain-income related benefits, such as Jobseeker’s Allowance. However, it will be replaced with a loan from April, which must be repaid when the property is sold or upon the death of the recipient.
A Freedom of Information request from Royal London has revealed that as of 22 January, just 6,850 SMI claimants have agreed to take up the loan. Those who don’t agree to move over to the loan will have their mortgage support terminated.
The Department for Work and Pensions (DWP) began sending out letters to those affected last year, explaining that they could either take up the loan option or stop receiving the support.
However, it has admitted that not all SMI claimants have been contacted yet, just a couple of months before the planned changes.
In addition, the DWP said the “vast majority” of its communication to date had been with pensioners receiving SMI, which Royal London argued suggests very few of the 67,000 working age families receiving SMI have been contacted.
Helen Morrisey, personal finance specialist at Royal London, said it was “truly shocking” that so many low income families are yet to receive the information they need about vital mortgage interest help potentially being switched off in just a matter of weeks.
She continued: “If thousands of people fail to complete the process in time they could face real hardship and even potential repossession if they can no longer afford to meet their mortgage interest bills.
“The DWP should pause the implementation of this policy until it is confident that everyone has had full information about the changes and the time and support to make an informed decision.”
A DWP spokesman said that it was contacting all SMI claimants to explain the change and signpost them to independent advice.
They added: “Over time, someone’s house is likely to increase in value, so it is reasonable that anyone who has received financial help towards their mortgage should be asked to pay that back if there is available equity when the property is sold.”
Yet more proof of the Tories dismantling the welfare system. However this is likely to backfire on them because claimants with little equity will have their properties repossessed and moved into social housing .This is likely to cost the Government considerably more than if they were paying the interest on there homes .