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Mortgage support reforms ‘needed to avoid risk of people losing their homes’

As the furlough scheme winds down and mortgage holiday arrangements end, many people could risk losing their home, the Centre for Policy Studies said.

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A think tank argues the SMI scheme needs reform to support low-income homeowners through the coronavirus crisis (PA)

A think tank argues the SMI scheme needs reform to support low-income homeowners through the coronavirus crisis (PA)

A think tank argues the SMI scheme needs reform to support low-income homeowners through the coronavirus crisis (PA)

More must be done to prevent homeowners who lose their job during the coronavirus crisis from also losing the roof over their head, according to a think tank.

The Centre for Policy Studies (CPS) warned that, as the furlough scheme winds down and mortgage holiday arrangements with lenders also end, many people could risk losing their home.

It argued that, even with the new Job Support Scheme, which is designed to protect viable jobs in businesses facing lower demand than normal, many people could struggle to pay their mortgages without reforms to the other support available.

Its report, supported by the Joseph Rowntree Foundation, argues that the Support for Mortgage Interest (SMI) scheme needs urgent reform to support low-income homeowners through the crisis.

The scheme offers homeowners help with their mortgage in the form of a loan, which recipients need to repay with interest when they sell or transfer ownership of their property.

It helps people with the interest on their mortgage, not the amount borrowed, and to qualify people usually need to be on a qualifying benefit, such as Universal Credit.

The Support for Mortgage Interest Scheme is going to be vital for ensuring people losing their jobs do not also lose their homes before they manage to get back to work James Heywood, Centre for Policy Studies

The CPS is proposing that a nine-month waiting period for SMI should be abolished and the first three months of it should be paid as a grant, not a loan.

It said the Government should allow people to claim SMI while moving into work and lenders should make people who are at risk of losing their homes aware of the scheme automatically.

The report also argues that there is a longer-term need to rebalance the welfare system to reflect the desire of people on low or moderate incomes to own their home.

James Heywood, CPS head of welfare and opportunities, said: “The Support for Mortgage Interest Scheme is going to be vital for ensuring people losing their jobs do not also lose their homes before they manage to get back to work.

“The Government needs to act now to make the necessary changes so people can move straight on to SMI when their mortgage holiday runs out or when they become unemployed.

“If they don’t, not only will people be forced out of home ownership into the rented sector, it will also cost the state more to support them through housing benefit.”

Darren Baxter, policy and partnerships manager at the JRF, said: “Reforming the Support for Mortgage Interest scheme is a targeted and cost-effective way of preventing struggling homeowners from being pulled further into poverty.

“This crisis has shone a spotlight on just how important a safe, secure and stable home is. The Government’s focus must be on ensuring people can stay in their homes, whether they be homeowners or renters.”

The Financial Conduct Authority (FCA) recently confirmed that mortgage borrowers who continue to face payment difficulties due to the impact of coronavirus will be able to get further support from lenders tailored to their needs in the coming months.

Mortgage holders can ask their lender for a payment holiday under current guidance which expires after October 31. But the FCA has said lenders will still be able to target those most in need, with help which will be based on individual circumstances.

PA