Changes to the Governments ‘Support for Mortgage Interest Scheme’.

by Mark Johnston

Changes to the governments ‘support for mortgage interest scheme’.

According to recent research the number of homes being repossessed in the UK has fallen to its lowest level since 2010 and this drop has come despite the economy falling in to a double dip recession and the high level of unemployment.

The better than expected outcome has been brought on largely by the governments ‘support for mortgage interest scheme’ (SMI).

While repossessions for 2012 appear to be on track to be slightly lower than last year, things could take a turn for the worse if changes are made to the ‘support for mortgage interest’ scheme.

Campbell Robb, chief executive of shelter, said that the “support for mortgage interest scheme is a lifeline for thousands of struggling home owners and has ensured that more households have avoided repossession”.

Experts have stated that over the last 3 years the ‘support for mortgage interest’ scheme has helped nearly 250,000 people to stay in their homes at any one time.

The support for mortgage interest (SMI) was launched to help those home owners who had lost their jobs. This can be claimed after 13 weeks after losing their jobs and for up to the first £200,000 of their mortgage.

The chancellor, George Osborne said in last years budget that this particular scheme will operate until at least January 2013, although the government have suggested that the scheme waiting period of 13 weeks may soon change to 39 weeks.

Lord Freud, the minister for welfare reform added “the current system of support for mortgage interest (SMI) payments does not encourage people to get on top of their own finances. It is also not sustainable”.

Government figures have shown that this scheme currently costs the government around £400 million a year.

Therefore the government is now considering changing the 13 week qualifying time period to 39 weeks and also reducing the qualifying loan size which is currently £200,000 to £100,000. Both of which could change by January 2013.

The Department of Work and pensions are looking in to the future structure of the scheme. A spokesperson recently said “we are consulting on how to provide mortgage support more efficiently in the future”.

However, the Council of Mortgage Lenders (CML) has  called for the government to extend the scheme as it is, at least for another year as it has been invaluable in minimising the number of repossessions in the UK.

Ray Boulger, John Charcols senior technical director, said “the 13 week timeframe is sensible as while some people will having savings that allow them to keep their mortgage payments for a number of months, this is clearly designed to help those who do not”.

It is clear that any changes made to this particular scheme at the present time could mean it would leave many home owners at risk of plunging in to arrears and then ultimately they would lose their homes.

There have been suggestions made by experts that the government could recover some of the extra costs of the scheme through the implementation of a charge on the property’s for long term claimants.



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