Reduction in SMI rate puts homeowners at risk

Homeowners who receive government help with their mortgage interest payments are likely to suffer a financial blow when the amount they receive reduces.

Homeowners who receive certain benefits can claim Support for Mortgage Interest. A standard interest rate is used to calculate how much someone in receipt of SMI will receive. The standard rate will reduce from 3.12% to 2.61% on 18 June 2017. The rate used to calculate SMI is predicated on the Bank of England’s average mortgage rate. This is the average rate on individuals’ outstanding mortgages and this figure has dropped significantly in recent years due to increasingly competitive rates offered on new loans and remortgaging deals. This is of little comfort to many of our clients who are trapped by negative equity and, therefore, unable to take advantage of these new competitive deals.

How will homeowners be affected?

This reduction means that a borrower with a balance of £100,000 and 15 years left on their mortgage term will see their SMI payment drop by over £40 a month. 

There is a very real risk that homeowners could face possession action because of this reduction. Many homeowners may have had possession orders suspended on the proviso that they pay a set amount towards their arrears each month. Where these homeowners are in receipt of SMI, they may unwittingly breach the terms of their SPO and be brought back to court.

We are encouraging anyone in receipt of SMI to contact their Jobs & Benefits Office to find out how their SMI payments will change. We have written to over 200 former clients to advise them of this change and are making people aware of the risk to their homes posed by a reduction in SMI on our Facebook, Youtube and Twitter pages. 

Getting help to deal with mortgage debt

It is essential that anyone receiving SMI review their finances to see if they can afford to make up the difference. It will be of particular importance that borrowers get advice if

• They are unable to make up the difference and risk falling into arrears
• They are currently in a voluntary repayment arrangement with their lender to clear arrears or
• They have previously been in court about their mortgage or secured loan.

People worried about maintaining payments on a mortgage or other loan secured on their home can contact Housing Rights on 028 9024 5640. Online advice is also available at www.housingadviceni.org