Recent rule change makes 200,000 more benefit claimants eligible for SMI loan

A rule change to the Support for Mortgage Interest (SMI) loan means 200,000 more benefit claimants are eligible for the scheme, according to Which?, which reported the figure on 28 September 2023¹. The SMI loan helps homeowners on certain benefits cover some of the interest on their mortgage¹.

To qualify, a claimant must be in receipt of income support, jobseeker's allowance, employment and support allowance, universal credit or pension credit¹. Government data from September shows 12,110 households are currently using the SMI loan, up from 11,787 in the previous quarter¹. Which? said the rule change means claimants should check whether they qualify¹.

The same article reported survey findings from debt charity StepChange, based on a survey of 2,000 people. Three in 10 mortgage-holders said they would feel uncomfortable discussing their finances and budget pressures with their lender, and one in five were unsure who they would be most likely to speak to if they had financial issues¹. Vikki Brownridge, chief executive of StepChange, said it can take someone a long time to open up and seek help if they are struggling with their finances¹.

Which? also reported that half a million mortgage deals are due to end by Christmas, with homeowners facing higher mortgage rates¹. It set out the support options lenders may offer: a temporary mortgage payment holiday, during which repayments are paused but interest continues to be added to the loan; a temporary switch to interest-only payments, which takes longer to clear the loan; and extending the mortgage term, which lowers monthly repayments but means paying more interest overall¹.

The vast majority of banks and building societies have signed a mortgage charter pledging to offer these support options with no new affordability checks and protecting credit scores if certain criteria are met, according to Which?¹. It added that if a borrower continues to take the relief after the six-month period, their credit file could then be impacted and an affordability check will be required¹.

Charles Roe, director for mortgages at trade association UK Finance, said all lenders have teams of experienced experts ready to help anyone worried about their mortgage, and that last year lenders helped over 200,000 borrowers who could not meet their full mortgage payments¹.

Why it matters for households

The change widens the group of benefit claimants who can apply for an SMI loan, which covers part of the interest on a mortgage rather than the capital. Eligibility turns on receiving one of five benefits: income support, jobseeker's allowance, employment and support allowance, universal credit or pension credit¹. The 200,000 figure is the number of additional claimants reported as eligible, not the number using the scheme; government data from September put current use at 12,110 households, up from 11,787 in the previous quarter¹.

For mortgage-holders who cannot meet full payments, the support options described are temporary payment holidays, temporary interest-only payments and term extensions¹. Under the mortgage charter, lenders have pledged to offer these with no new affordability checks and with credit scores protected if certain criteria are met, but continuing the relief beyond six months can affect a credit file and trigger an affordability check¹. The waiting period and limits that apply to SMI are separate from those charter commitments.

The survey findings point to a practical barrier: three in 10 mortgage-holders would feel uncomfortable discussing their finances with their lender, and one in five were unsure who to speak to¹. Which? reported that half a million mortgage deals are due to end by Christmas, with homeowners facing higher rates¹.

What happens next

No further dates are given in the report. The article does not state when the rule change took effect, nor when the next SMI caseload figures are due. The September government data showing 12,110 households using the loan is the most recent figure reported¹.