Are you at risk now mortgage support benefit is axed?

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17 Apr 2018

Is your household going to be at risk now mortgage support benefit has been axed?

Author: Greg May

The Government have axed the mortgage support benefit which has been provided to low income households since 1948. Support for mortgage interest (SMI) helps those on income related benefits (i.e. pension credit, income support and jobseekers allowance) pay the interest on their mortgage. The funds are sent directly from Department of Work and Pensions (DWP) to the mortgage lender.

According to the Government, there are about 124,000 people receiving SMI at a cost of £205 million a year to the taxpayers. Those in favour of the change argue that it’s not the taxpayer’s obligation to subsidise people’s mortgages when many of them struggle to afford the repayments on their own home.

The change was announced in 2015 when the Government found the current set-up to be unsustainable and announced plans to stop paying SMI in April 2018. Instead of paying SMI, homeowners will be able to secure a state based loan against the mortgaged property. The loans will function much the same as the SMI but with interest being added every month to the total amount owed.

The Government backed loan does not have to be paid back, although the homeowners can make voluntary repayments if they can afford to. If the property is inherited by someone else, they will be required to repay the loan from any extra available equity if/when the property is sold. If there isn’t enough equity to cover the cost of the loan, it will be written off.

Almost half of those who receive SMI are of retirement age and many have interest only mortgages. There is a concern that this change may result in tens of thousands of people, many of whom are pensioners, ending up with two mortgages on their property.

The DWP have countered this by saying; “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 if there is available equity when the property is sold.”

Greg May, Romans’ Financial Services Director explains; “Statutory sick pay is only £87.55 per week, with food, bills plus mortgage repayments to make, many households would struggle to get by on this income. In the run up to the removal of SMI, we have seen more interest around our income protection insurance products as homeowners, particularly those with families to support, want to safeguard their income should the worst occur.”


If you are concerned about how this change could affect you and want to learn more about our income protection insurance, contact Romans on 0118 3219 536.


 For insurance business we offer products from a choice of insurers.


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