Mortgage Benefit Changes

Are homeowners ready for mortgage benefit changes?

Questions have been raised on whether homeowners are ready for the government’s upcoming changes on SMI, or “support for mortgage interest”, a benefit designed to help households struggling to meet their mortgage repayments.

The free benefit will now close in April 2018, with its replacement taking the form of a government-backed loan to be paid back with interest. The government says the new loan provides households with a safety net, but critics suggest this is merely saddling homeowners with a “second mortgage” to consider.

With these changes on the horizon, now is the ideal time for those without protection to consider what might happen if they had to rely on state support. Nobody wants to find themselves in a financially vulnerable situation, but circumstances can change quickly, and without cover in place households can find themselves struggling.

Why has the change caused concern?

The biggest worry for the industry is not the transition to the loan itself, but the low number of people that have signed up. One report showed that under 7,000 households had signed up to the new loan, a fraction of the 124,000 households that receive SMI.

Some experts want the government to delay the changes, to give people more time to sign up. The Department for Work and Pensions (DWP) has stated they are contacting all SMI claimants to ensure they are aware of the changes and point them towards the next potential steps.

How might this effect households?

Households could face genuine hardship and even repossession if they fail to complete the loan application process in time. To make matters worse, the previous 13-week waiting time on claiming for SMI has increased to 39 weeks, a significant period to be trying to cover household bills. Some experts suggest that possible increases in base rate may also see a climb in those relying on SMI.

To be eligible for SMI, a homeowner would need to be already receiving either income Support, Income-based Jobseeker’s Allowance, Income-based Employment and Support Allowance or Pension Credit. But SMI will be unavailable to those with more than £16,000 in savings, which means without financial protection, hard-earned savings could be hit before any support is received.

How can I ensure I don’t need SMI?

This change has put even more emphasis on the importance of protecting household finances. But research by a leading provider indicated that less than half of homeowners have appropriate financial protection in place should they be unable to work, with just over 25% of the working age population having a savings buffer equivalent to three months’ income.

With a comprehensive protection plan, you can build your financial resilience to ensure you won’t need to rely on state support, or eat into your savings should your circumstances change. We can talk to you about your finances and help you ensure you do not find yourself relying on loans to fill the income gap left open by the unexpected.

Need help understanding these changes?

If you would like to discuss these changes to see how they will affect you and your mortgage repayments, then please get in touch with us. Our experienced team of mortgage advisers will provide you with personalised and professional advice. To contact us please give us a call on 01453 887179 or you can email us at