SMI qualifying period cut to three months and zero earnings rule removed

The qualifying period for Support for Mortgage Interest (SMI) was cut from nine months to three months for Universal Credit claimants from April 2023, and the "zero earnings" rule was removed so that working claimants could receive the support¹. The Chancellor, Jeremy Hunt, committed to the shorter qualifying period in the November 2022 Autumn Statement¹. The change took effect from 3 April 2023, according to Which?, which reported that anyone who qualifies is automatically offered the mortgage support². Business Debtline also gives the date as 3 April 2023, noting that claimants usually cannot receive loan payments for the first three months of a Universal Credit claim³.

SMI is a government loan scheme that helps with the interest costs of mortgages and certain home loans for people claiming means-tested benefits: Universal Credit and the legacy Department for Work and Pensions benefits it is replacing, plus Pension Credit¹. It became a loan scheme in 2018, having previously been a social security benefit¹. Working-age claimants must receive Universal Credit for a three-month qualifying period before they qualify; Pension Credit claimants can get SMI immediately¹. The loan caps are £200,000 for most working-age claimants and £100,000 for Pension Credit claimants¹. The amount payable is not based on the interest a household actually pays but on a standard interest rate, which was 2.65% in July 2023, based on the average mortgage rate published in Bank of England statistics¹. Payments are generally made directly to lenders¹.

SMI loans are repayable with interest when the property is sold, ownership is transferred, when the claimant dies, or on a voluntary basis¹. The interest charged is set for six-month periods at the average gilt rate published by the Office for Budget Responsibility; the rate for 1 July to 31 December 2023 was 3.28%¹. Which? reported the government interest rate as 3.03% and the rate used to calculate SMI payments as 2.09% in its April 2023 article, figures that differ from the Commons Library's July 2023 figures².

The government said the change would give 200,000 extra people faster access to the support scheme². The Building Societies Association described it as a "common-sense change from the government"².

Take-up of SMI fell sharply after the 2018 switch to a loan. In the quarter ending February 2023 there were 11,787 households with an SMI loan in payment, against a caseload of more than 100,000 before the change¹. A DWP take-up study published in March 2022 found most eligible households surveyed were unlikely to claim under the new rules, with "loan related issues" the greatest barrier¹. The loan caps have not been routinely reviewed for inflation or house prices; the last change was in January 2009¹. The government says it has "no plans to amend the calculation of SMI"¹.

Why it matters for households

The change affects homeowners on Universal Credit who have a mortgage and are behind on interest payments. From 3 April 2023 they need three months of Universal Credit entitlement rather than nine before SMI can be paid, and they can keep claiming while in paid work, where previously any paid work by the claimant or their partner stopped SMI¹. Pension Credit claimants are unaffected by the qualifying period and can claim immediately¹. The support covers interest only, not the capital borrowed, and it is a loan secured on the property, repaid with interest on sale, transfer of ownership, death or voluntarily¹. The amount is calculated at the standard rate rather than the household's actual mortgage rate, which the Commons Library notes was 2.65% in July 2023, lower than rates many households faced¹. The Commons Library also notes the loan caps are not uprated and the last change was in January 2009¹. For those renting, non-repayable help with housing costs is available instead¹.

What happens next

No further changes to SMI have been announced. On 23 June 2023 the Chancellor, the principal lenders and the Financial Conduct Authority agreed a range of support measures for people struggling with mortgage payments, a package that did not include further changes to SMI¹. Business Debtline sets out measures in that package: from 26 June 2023 borrowers should not be forced to leave their home within 12 months of a first missed mortgage payment, and from 10 July 2023 they should be allowed to lock into a deal up to six months before an existing fixed-rate deal ends³. The Resolution Foundation has suggested further changes to SMI, including raising loan caps, updating the standard rate, further reducing qualifying periods or reversing the 2018 conversion to a loan¹. The Department for Work and Pensions published an impact assessment of SMI loans on 6 May 2025, which says the April 2023 changes were made to widen eligibility and encourage employment among Universal Credit recipients⁴.