General insurance provider, Berkeley Alexander, alerts brokers to government plans to change the Support for Mortgage Interest scheme (SMI) from April 2018 from a benefit to a loan that must be repaid.
Those households that do not take up the new loan offer will have their mortgage benefit axed in just 6 weeks’ time. Despite this, according to figures from an FOI request made in October 2017, less than 5% of the 124,000 households currently receiving SMI had taken up the loan scheme and it is feared the majority are still not yet aware of the change or the risk*.
SMI covers the interest payment on a mortgage for those low-income families who qualify for the benefit. Under the new scheme, the benefit becomes a loan which is repayable, ultimately when the home is sold. According to the Department for Work & Pensions, letters on the changes began to be sent out from July 2017 with follow up phone calls planned, but thousands are yet to be contacted.
Geoff Hall, Managing Director at Berkeley Alexander, comments: “Without SMI benefit these low-income families face real hardship and potentially repossession. The government needs to step up the communication process and it’s quite astounding that such a fundamental change to financial benefits should not have been better publicised.
“However, Brokers have a critical role to play here in advising clients of their protection options and ensuring MPPI (Mortgage Payment Protection Insurance) is always offered. Another important point to make clear is that government support, whether SMI or the new loan scheme, will only cover mortgage interest – not the repayment, making MPPI far more valuable.”
*Department for Work & Pensions