From SMI to mortgage support

This report from UK think the Centre for Policy Studies looks at how the government can help struggling homeowners through the pandemic.

The pandemic has had a shattering impact on many families’ livelihoods. Claims for Universal Credit have shot up, and there will be more pain to come as the furlough scheme is wound down, which coincides with the end of the mortgage holiday arrangements. Half of those with a mortgage who have moved onto Universal Credit since March have needed to take up a mortgage holiday. This report warns that, as millions face losing their jobs when furlough ends next month, many will risk losing their homes as well when the mortgage holiday arrangements end at the same time. Even with the Job Support Scheme, many could struggle to pay their mortgages without reform to the support available. Despite 1/3 of those in poverty being owner-occupiers, housing benefit only covers renters. Home owners can only get help with their mortgage interest payments, and even then, they must wait nine months to qualify – and the whole amount is withdrawn if they take on any work at all.

The report, supported by the Joseph Rowntree Foundation, argues that the Support for Mortgage Interest (SMI) scheme needs urgent reform to support low-income homeowners through the crisis, and more generally to improve the benefits system so that it better supports struggling homeowners. It argues that as well as being necessary and compassionate, such measures will be far more cost-effective for government than seeing people lose their homes and go on to housing benefit. Largely because the current version of SMI is a loan-based scheme with virtually no ultimate cost to government. To ensure those with mortgages who lose their jobs don’t also lose their homes, the CPS is proposing that: the nine-month waiting period for SMI should be abolished; the first three months of SMI should be paid as a grant, not a loan; Government should allow people to claim SMI while moving into work, as with other benefits; lenders should make people who are at risk of losing their homes aware of this scheme automatically; to ensure that people do not remain in homes they cannot afford in the long term, SMI should be time-limited for claimants who are able to work and are not receiving a disability-related benefit. The report also argues that there is a longer-term need to rebalance the welfare system to reflect the desire of those on low or moderate incomes to achieve, and retain, home ownership.

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