The Government should halt the introduction of the loan in place of SMI
3 min read
The introduction of a loan in place of SMI runs a real risk that vulnerable people will run into arrears with their mortgage, writes Labour MP Margaret Greenwood.
Today, help through the social security system for homeowners on low incomes to pay the interest on their mortgages will change from a benefit to a government loan.
This is a major change for those affected, bringing with it the risk of debt for thousands of disabled people and pensioners. Yet the Government’s own figures show that by the last week of March it had still failed to contact around 36,000 people, or 40% of those affected, to explain the change.
Support for Mortgage Interest or an equivalent has existed since 1948 to help people keep their homes when they fall on hard times: when they are made redundant, if there is a shortfall in their pension or if they become ill or disabled. It is mean-tested and by definition the only people who qualify are on very low incomes. It’s an important safeguard for homeowners.
While mortgage interest payments will in most cases cease from 6th April, they will not automatically become a loan. Claimants have to opt to take out the loan and sign an agreement with the Department for Work and Pensions.
It seems that many are wary of taking out a loan. The Government originally estimated that around 6% of people claiming SMI would decline it. In fact we now know that 30% of all claimants have already decided not to take on the loan and only 14% of claimants have so far agreed to.
There is a real risk that people who are either unaware that their mortgage interest payments will stop or who decline the loan and then find it difficult to manage could run into arrears with their mortgage.
According to the latest figures available, around 40% of people receiving Support for Mortgage Interest payments are pensioners. Age UK is concerned that many could simply try to cope without the loan by cutting back on essentials like heating instead.
Many people with long-term disabilities claim SMI to enable them to live independently, paying the interest on their mortgage under a government shared ownership scheme.
Some people who are elderly or disabled may find that they need to move to more specialist residential care, but when their home is sold the loan will have to be repaid, leaving them with less to meet the cost of the care they need.
The replacement of Support for Mortgage Interest with a loan has been poorly communicated and is all too reminiscent of the Conservative-led Coalition’s failure to give women born in the 1950s sufficient notice of the change to their state pension age.
Yet again we see this Conservative government removing social security support from those who need it: in this instance, it’s disabled people and the elderly on low incomes who will bear the brunt of austerity.
The Government should halt the introduction of the loan in place of SMI and think again.
Margaret Greenwood is Labour MP for Wirral West and Shadow Secretary of State for Work and Pensions
The Building Societies Association has responded to Margaret Greenwood's article saying ''for MPs dealing with affected households in constituency surgeries, please note that the DWP has confirmed that current claimants will still be able to take out an SMI loan at any time and have their payments backdated.. Read the full response here.
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