- Building societies and banks urged the government to rethink mortgage support to help the homeowners struggling to pay mortgages.
- Support for Mortgage Interest, it is a loan that certain people in the UK can avail benefits that get repaid on the sale of the property.
- Banks want wait time for applicants to be reduced to 13 weeks from 39 weeks.
Building societies and banks are urging the authorities to rethink the mortgage support programme to help the homeowners struggling to pay mortgages because of the pandemic.
Known as the Support for Mortgage Interest (SMI), it is a loan that certain people in the UK can avail on benefits that get repaid on the sale of the property. The government is being asked to bring down the wait time for the loan.
The issues in the scheme
Presently, post job loss, applicants have to wait for 39 weeks to be eligible to make a claim. Banks are urging to bring down the waiting time to 13 weeks. A similar reduction in waiting time was seen post the financial crisis of 2008-09, for seven years. The government said that those struggling should first approach their lenders, and they are bound to provide support to them.
The SMI loan helps those who have lost their jobs with help towards their mortgage’s interest payments. It used to be, for the last 70 years, a benefit that did not have to be paid back. In 2018, however, the government changed it to call it a loan.
The loan would be repaid after an owner transfers ownership or sells the house. SMI amount cannot be channelled towards missed mortgage payments, insurance policies or the amount borrowed.
The eligibility requirement requires that the maximum mortgage amount should be £200,000 for claimants and for pensioners £100,000. The lender is directly paid, and anyone, even those with poor credit history, can be a claimant. The claimants would have to be on any of the benefit schemes like universal credit or jobseeker’s allowance.
But those on universal credit would not be able to claim SMI in case they have received payment for any kind of work. Getting involved in any kind of work, even for a few hours, would again lead to the nine-month wait. Lenders are saying that the rules need to be relooked to allow people to work up to 16 hours maximum in a week without their claim getting affected.
The director of mortgages at UK Finance, Charles Roe said that the eligibility criteria and waiting time were preventing a lot of struggling homeowners from availing the benefits of the loan. He said that the body was urging the government to urgently review these benchmarks to help those that most need them without having to wait for more than nine months.
Building Societies Association’s head Paul Broadhead said making the scheme more flexible and reducing the waiting time would provide a compassionate response to the financially affected, and changing the norms would not have any long-term on the government’s expenditure.