UK Finance and the Building Societies Association (BSA) have called for vital changes to be made to the Support for Mortgage Interest (SMI) scheme to prevent mass evictions and repossessions as furlough ends.
What is SMI?
SMI is a government loan scheme which supports homeowners that are receiving benefits. Those who are eligible can get help towards interest payments on both their mortgage as well as loans that have been taken out for certain house repairs or improvements.
Read more here at https://www.gov.uk/support-for-mortgage-interest
As UK Finance and the BSA have identified, however, the problem with the scheme is that homeowners must currently wait 39 weeks to claim. Their financial situation could worsen during this time, and their house could be subsequently repossessed.
UK Finance & BSA’s Proposed Changes
Whilst furlough has provided financial aid to millions of people and many homeowners during the pandemic, this scheme recently ended on September 30th. Without this financial protection, UK Finance and the BSA are worried that the oversights of the SMI scheme will lead to a wholly preventable surge in home repossessions this autumn. Thus, the two changes that have been proposed by the organisations are:
1) Reduce the wait time for accessing SMI from 39 weeks to 13 weeks – “to make sure help is given when people need it most”
2) Allow people on Universal Credit to claim SMI if they are working on reduced hours
They explained in a press release: “Support for Mortgage Interest is a loan and not a benefit, meaning these changes will have a very limited impact on the government purse, but will have a huge impact on the households that will benefit.”
Read more here at www.ukfinance.org.uk
UK Finance and the BSA also revealed that mortgage lenders have provided over £2.9 million mortgage payment deferrals throughout the pandemic. Whilst lenders will continue to support those struggling, some homeowners will simultaneously benefit from SMI.
Comments from UK Finance & BSA
Prior to the end of furlough last month, Paul Broadhead, head of mortgage and housing policy at the BSA, said: “With the end of the furlough scheme only days away, there is a likelihood that unemployment will rise. Without urgent modification of the SMI scheme the risk of home repossession could become a reality for many despite the best efforts of lenders.”
“Without the reforms, we expect more government funding will be required for the provision of housing benefits for former homeowners who were unable to get the financial support they needed, when they needed it.”
Charles Roe, director of mortgages at UK Finance, added: “The current wait time and eligibility criteria for SMI is preventing much-needed help going to struggling homeowners before their mortgage arrears start building up.”
“As the furlough scheme comes to a close, we may see more people needing to use SMI. UK Finance and the BSA are calling on the government to urgently review the scheme’s eligibility criteria and reduce the existing wait time of over nine months.”
Help for Homeowners
Financial hardship has undoubtedly been a theme throughout the pandemic. Without UK Finance and the BSA’s proposed modifications to the SMI scheme, countless repossessions and evictions could go ahead in the coming months.
If you are currently facing similar circumstances, contact us immediately so that we can help stop the repossession of your home. Our experienced team at HMS is dedicated to finding a solution to your problem. Click here to get started or call 0800 298 0571 for free advice.