Chaotic mortgage support changes put low income households at risk of debtors

Stephen Morgan MP has criticised a Government move that he is warning could cause real hardship for homeowners on low income

On 6 April Support for Mortgage Interest will change from a benefit payment to a loan which will be managed by Serco. Only 14% of claimants have agreed to take out the loan and 30% have already declined the loan.

5,000 people had not even reached an initial letter from the DWP just two weeks before the change is due to take place had also still not managed to contact over a third of claimants by telephone to explain the change.

There is a real danger that people who try to manage without taking out a loan could try to manage by cutting back on essentials like heating instead. There are concerns too that many could be at risk of going into arrears.

A parliamentary question put down by Labour’s Shadow Housing Minister Melanie Onn MP has revealed that in the South East, over 12,000 local people received SMI in 2016-17.

Homeowners can receive support if they find themselves in difficulty with their mortgage payments, usually due to redundancy, disability, or a shortfall in their pension income.

The change will affect the lowest earning households, already in receipt of other state benefits such as Pension Credit or disability benefits who may be pushed further into poverty.

According to the Government’s latest figures, 90,000 people receive SMI. A large proportion of recipients are pensioners or people of working-age currently receiving benefits for disabled people.

People will have to pay back the loan if the property is sold. That may make it harder for people to downsize in later life and it may also be a problem for people who need to move because they need specialist residential care which is expensive.

Many SMI recipients have reported poor communications from Serco, with many not having queries answered.

The government had previously estimated that just 5% of working age, and 8% of pension age recipients would not take up the loan. The government’s own figures now show that 30% have already decided not to take out the loan with thousands yet to take a decision.

The government has conceded that they will not stop the benefit where they have not contacted claimants in time – but has refused to pause the change of SMI to a loan for all recipients.

Royal London Insurance have predicted a 10-year SMI loan could cost homeowners over £11,700 in repayments.

Stephen Morgan MP, said:

‘Support for Mortgage Interest is an essential lifeline that helps to keep a roof over people’s heads.

The Government wants to save money, but they’re not thinking about the impact on homeownership this will have, particularly on pensioners and vulnerable disabled people.

SMI costs less now than it did ten years ago, there is no good reason to change SMI to a loan which is causing real uncertainty for many homeowners in Portsmouth.’

Labour’s Shadow Housing Minister Melanie Onn, commented:

‘This move from the Tories, to implement this change with only a small number signed up for SMI, shows how badly thought through it is.

Putting home owners at risk of debt, instead of delaying the rollout, makes clear that they are more interested in their failed austerity agenda than protecting the most vulnerable.

This is causing real uncertainty for homeowners on very low income, many of whom are pensioners. The government should halt this change before it causes real hardship.’

Stephen Morgan MP has written to the Secretary of State for Work and Pensions demanding that the government halts the cut to SMI.