Lenders are calling for the Government to reduce the time struggling borrowers must wait for a ‘Support for Mortgage Interest Loan’ from the current 39 weeks to 13 weeks.
Both the UK finance, which represents the banking and finance industry, and the building society association (BSA) are calling for the waiting time for those who are eligible to claim ‘Support for Mortgage Interest’ to be lowered to its original length of just 13 weeks. The current time for people having to wait is 39 weeks.
The Support for Mortgage interest or SMI for short is help offered by the government to owner-occupiers in receipt of Income Support, income-based Jobseekers’ Allowance, Universal Credit or Pension Credit. This helps homeowners unable to work or find work pay the interest on their mortgage, saving their home from repossession.
In April last year, the Government changed the SMI from a benefit to a loan repayable in full which attracts interest. The current rate is 1.3%, while the loan is repaid when the property is either sold or ownership transferred such as in the event of a death. SMI payments are actually made directly to the mortgage lender and can be claimed up to £200,000 of the mortgage.
Normal forbearance measures will continue to be in operation however long the pandemic persists, but we are also asking government to do their part, in the first instance by reducing the time that borrowers must wait for a Support for Mortgage Interest loan from the current 39 weeks to 13 weeks, adding to the options available, particularly for those who were in financial difficulty before the pandemic.