Government plans tougher rules on mortgage help
Tighter controls on support for homeowners who are struggling to pay their mortgages are being proposed by the government.
Welfare reform minister Lord Freud has today announced a consultation on how support for mortgage interest payments could be handled in the future.
The consultation suggests households eligible for SMI payments could only receive them for a set period of time, rather than for as long as they remain eligible.
It also proposes the introduction of a mechanism where payments received after the cut off date would be subtracted from the value of the property, and repaid to the government when the property is sold.
Lord Freud said: ‘The current system of SMI payments does not encourage people to get on top of their own finances. It is also not sustainable. Even with today’s low interest rates it costs government £400 million a year.
‘We are committed to supporting homeowners to stay in their own homes when times are hard. But in the future this type of support must be fair and affordable so we are seeking views from experts and the wider public, including options for putting a charge on the homes of future claimants so when they sell up we can recoup some of the costs.’
Families that receive income support, income-based jobseeker’s allowance, income-related employment and support allowance, or pension credit, may be eligible for SMI payments.
These can only be used against the interest charged on a mortgage, rather than the loan itself. Last year the government slashed the standard interest rate for SMI payments from 6.08 per cent to 3.63 per cent in response to falling interest rates.
There is also a £200,000 ceiling on eligible mortgages, limiting payments to a maximum of £139 a week.