Unemployed homeowners who are eligible for Support for Mortgage Interest (SMI) will be severely limited on what they can claim for when the scheme changes from a benefit into a loan.
The Department for Work and Pension (DWP) is also planning to change the time limit from 13 weeks to 39 weeks meaning people who find themselves out of work will have to wait almost nine months before they can make a claim.
In addition, the maximum size of the mortgage is being reduced from £200,000 to £100,000.
The current benefit is to be converted into a loan complete with interest to be paid on that loan. The DWP has not confirmed a timescale for these changes.
Alexander Burgess, director at insurance firm British Money, commented: “These changes are radical because last year £400 million of benefit was paid to 239,000 families. When the benefit is reduced this will cause massive hardship and may spur on a significant number of repossessions.”
Under the current system, SMI provides unemployed homeowners with certain income related benefits that help towards interest payments on their mortgages or loans taken out for certain repairs and improvements to their home.
It is normally paid direct to the mortgage lender after a waiting period of 13 weeks after signing up for Jobseeker’s Allowance and other income-related benefits, for mortgages up to £200,000.
SMI helps jobseekers keep up with interest on payments and in turn avoid a potential eviction after falling on hard times and further information can be found at: https://www.gov.uk/support-for-mortgage-interest/overview.
British Money launched Universal Cover earlier this month, a type of mortgage protection insurance which pays benefits if people are unable to work due to accident, sickness or unemployment or have to give up work to become a carer for a family member.
It covers many medical conditions that ASU (accident, sickness or unemployment) policies exclude such as backache and stress related conditions, as long as they are not pre-existing conditions.
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