Government called to put ‘second mortgage’ scheme on hold
The government has been called to put a so called ‘second mortgage’ scheme on hold.
Initially scheduled to come into effect in April 2018, the new system will replace the “support for mortgage interest” (SMI) which helps those who are struggling to cover the cost of their mortgage. Those who choose to sign up for the revised scheme will instead be offered the funds in the form of a loan which, with interest, will then be repaid.
However, data revealed by Royal London following a Freedom of Information Request showed that of the 124,000 people receiving the SMI benefit, just 6,850 households have registered for the new system.
The low number of sign ups have prompted calls for the implementation of the new scheme to be put on hold.
In addition, the replacement of the SMI has received criticism, namely because of the demographic that are set to be affected. Having been brought in following the second-world war, the original SMI is mainly claimed by pensioners, at an annual cost of around £205 million according to the government. Whilst the aim to revise the system is to curb the amount spent, critics have described the new scheme as a ‘second mortgage’, which could negatively impact those who opt in.
Urging the government to put the plans on hold was Helen Morrissey of Royal London. She stated: “It is truly shocking that many thousands of low-income families are yet to receive the information they need on the fact that their mortgage interest help could be switched off in just 10 weeks. If thousands of people fail to complete the process in time, they could face real hardship, and even potential repossession, if they can no longer afford to meet their mortgage interest bills.
“The Department of Work and Pensions (DWP) should pause the implementation of this policy until it is confident that everyone has had full information about the changes, and the time and support to make an informed decision.”
The DWP state that whilst information on the changes did start to be distributed to July, not all claimants have yet been contacted.