SMI opened to employed Universal Credit claimants

The Department for Work and Pensions (DWP) has reformed its Support for Mortgage Interest (SMI) loan scheme, with the changes taking effect on 3 April 2023¹. The waiting period for Universal Credit claimants has been cut from nine consecutive months of unemployment to three months, and the scheme has been opened to claimants who are in work¹. The government says the change will give 200,000 extra people faster access to the support scheme¹.

Under the previous rules, Universal Credit claimants had to have been unemployed for nine consecutive months before they could access an SMI loan, and a strict zero-earning rule meant support ended once a claimant secured a job¹. From 3 April, Universal Credit claimants must have been receiving Universal Credit for three months in a row before they can claim SMI, and anyone who qualifies will automatically be offered the mortgage support¹.

SMI helps homeowners cover the cost of some of the interest on their mortgage, or interest costs on a loan taken out for certain home improvements, such as repairs to keep a property habitable or to adapt it for people with disabilities¹. It does not help towards the amount borrowed, only the interest¹. Help is usually given on the interest on up to £200,000 of a loan or mortgage, and the interest rate used by the government to calculate the amount of SMI is currently 2.09%¹.

The money is paid as a loan, which must be repaid with interest when the home is sold or ownership is transferred to someone else¹. The current interest rate set by the government is 3.03%; it can go up or down but will not change more than twice in a year¹. The government says no one will be asked to sell their home in order to repay the loan, and claimants can contact the DWP about transferring the loan to a new home if needed¹.

Eligibility depends on which benefit a claimant receives¹:

Providing the qualifying conditions continue to be met, there is no time limit on how long SMI can be received¹.

The reforms were welcomed by the Building Societies Association (BSA), which described the move as a "common-sense change from the government"¹.

Why it matters for households

The change affects homeowners on Universal Credit who have a mortgage and are either out of work or earning a wage. From 3 April 2023, the wait for help falls to three months of Universal Credit, and earning no longer disqualifies a claimant¹. Because SMI covers interest only, the capital owed on a mortgage is unaffected, and the payments are recovered as a loan plus interest when the property is sold or transferred¹. The scheme sits alongside other support: homeowners in Scotland may be eligible for the Home Owners' Support Fund, some local authorities in Wales run mortgage rescue schemes, and Housing Rights Northern Ireland provides online support for people concerned about mortgage payments¹. Lenders may also offer a temporary mortgage payment holiday, a temporary switch to interest-only payments, or an extended mortgage term¹. Which? reported that mortgage interest rates were averaging over 5% for two- and five-year fixes, and that more than 1.4 million homeowners faced significant interest rate hikes when their fixed-term mortgages ended in 2023¹.

What happens next

The changes took effect on 3 April 2023¹. No further dated steps have been reported.