Change to Support for Mortgage Interest

The interest rate used to calculate how much help homeowners can get towards the interest on their mortgage is falling to 3.12% from 6 July 2015.  It's important that any homeowners who receive this payment as part of their benefits understand how this change will affect them.  We're encouraging any homeowners in receipt of Support for Mortgage Interest (SMI) to get in touch with our mortgage advisers to find out how their benefits will change and what they need to do as a result. 

Reasons for the reduction

The SMI rate was last cut in December 2010 falling from 6.08% to 3.63%.  At that time it was agreed that the rate would only change in the future if there was a 0.5% or more difference between the SMI rate and the Bank of England's  published average interest rate.  With an abundance of new low rate mortgages available on the market, the average rate fell to 3.12% in April of this year, triggering a reduction in the rate used to calculate SMI payments.   However, many of the people who receive SMI will have taken out mortgages several years ago at much higher rates of interest.   Regardless of the interest rate recipients of SMI actually pay on their mortgage, all payments will be calculated based on a rate of 3.12% from 6 July 2015. Many homeowners will now need to pay their lender extra money each month so they don't fall into arrears.  

How will homeowners in Northern Ireland be affected?

A borrower with an interest only mortgage balance of £130,000 and a 25 year term will see their SMI payment decrease from £393.25 per month to £338, a drop of £55.25.  To avoid repossession the borrower must continue to make their contractual monthly payment to the lender each month.  This means our borrower will need to make up this difference  of £55.25 to the lender and will have to see what cutbacks can be made from other household spending to meet this new expense.  

Risks to homeowners with suspended possession orders

When the rate was cut in December 2010 many borrowers were caught unawares.  Many homeowners ended up in breach of the terms of their suspended possession orders but remained unaware of this fact until they were issued with further court papers.  Homeowners who receive SMI need to get advice now to make sure that this doesn't happen to them and that they're fully prepared for July's change. 

Helping affected homeowners

We're asking anyone who receives SMI to get in touch with us to find out exactly how their benefits will be affected and what they need to do to avoid repossession.  If you're worried about these changes, please call our mortgage debt advice service on 0300 323 0310. 

Mortgage payment help for homeowners

Homeowners on certain qualifying benefits can get government help to pay the interest portion of their mortgage.  You must meet certain eligibility criteria to apply and there are conditions on the type and amount of loan that can be considered under this scheme.  Find out more about this payment on our housingadviceNI website.