Calls for pause on change to mortgage payments help as thousands reject loans
Labour said the changes to support for mortgage interest risked causing real hardship for people on low incomes.
Labour has urged the Government to pause changes to the benefits system amid fears thousands of vulnerable homeowners will lose support to help pay their mortgage.
The party said the changes to support for mortgage interest (SMI) risked causing real hardship for people on low incomes.
From Friday the existing system of benefits will be changed to Government loans which have to be repaid.
Many more claimants than expected have refused the offer of a loan, while there has been complaints about the way the changeover has been handled.
Shadow work and pensions secretary Margaret Greenwood said: “It is worrying that the Government seems determined to push ahead with this change despite the risk of it causing real hardship for people on low incomes.
“Many of the people who claim SMI are elderly or disabled, and it is extremely concerning that pensioners might try to cope without the loan by cutting back on essentials like heating.
“Even at this late stage the Government could and should think again and halt this change.”
Tomorrow will see big changes in welfare support for struggling homeowners through the Support For Mortgage Interest (SMI) scheme.— Shelter (@Shelter) April 5, 2018
But there are growing concerns that only a small proportion of SMI claimants have signed up to receive the new loan: https://t.co/IxEJolGl4B
The present SMI scheme helps homeowners on certain benefits pay the interest on their mortgage.
The new system will replace this with a state-backed loan, secured against the mortgaged property, with interest added each month.
Those who claim for longer will need to pay back more interest, and those who claim for several years could face bills for thousands of pounds.
The mortgage holder does not have to pay the loan back until the property is sold, or transferred to someone else.
Those who back the change say it is not the role of the taxpayer to subsidise other people’s mortgages and acquire a property they can potentially pass onto their children.
Around 90,000 people now claim SMI, according to the latest Government figures, of which around a third are receiving pensions credit.
In 2017/18 the Government is set to spend around £161 million on SMI.
Ministers originally estimated that 5% of working age recipients and 8% of pensioners would not take up the offer of a loan.
However, the most recent figures for March 21 show around 27,000 people have declined the offer of a loan – 51% of those who had been contacted.
Around 13,000 have accepted the loan offer and some 14,000 remain undecided, according to the Department for Work and Pensions.
The same data also showed that 5,000 claimants had not yet been contacted by contractors Serco, which is handling the transition.
A further 31,000 claimants had not yet been contacted by phone to follow up an original letter explaining the changes.
Charity Age UK has warned that some pensioners might try to cope without the loan by cutting back on essentials like heating.
A Department for Work and Pensions spokesperson said: “Over time, someone’s house is likely to increase in value, so it’s reasonable that anyone who has received financial help towards their mortgage should be asked to pay that back.
“People who sign up to the loan will continue to get help with their mortgage interest and it is only repayable if there is available equity when the property is sold.
“If people decide to decline the loan now but change their mind in future the loan can be backdated so in effect there would be no break in payments.
“We have already contacted everyone currently in receipt of SMI to explain the change but we are making sure people have time to review the documents, obtain advice and consider their options.”