Changes to Support for Mortgage Interest: The Impact in Northern Ireland

Support for Mortgage Interest (‘SMI’) is a payment available to people receiving Income Support; income-based Jobseekers’ Allowance; income-based Employment & Support Allowance; and Pension Credit. These payments are vital in allowing low-income households to maintain their mortgage repayments and sustain their homes. 

The next few years will see several changes to the SMI scheme, specifically:

• Extension of waiting period from 13 to 39 weeks. ​From 1 April 2016, the waiting period before a household can receive SMI will be increased from 13 weeks back to the pre-recession level of 39 weeks.
• Change in eligibility for SMI under Universal Credit. The SMI scheme will continue under Universal Credit; however, SMI will not be payable to a household receiving Universal Credit, if the claimant or their partner undertakes any paid work.
• Conversion of SMI from a benefit to an interest-bearing loan. It is proposed that from 1 April 2018, SMI will become an interest-bearing loan which is secured against the mortgaged property in question. Interest on the loan will be charged at the Office for Budget Responsibility’s forecast of gilts. This proposal is contained within Clauses 16-19 of the Welfare Reform & Work Bill, which is currently under consideration at the Westminster Parliament: this change has therefore not yet been confirmed.

Housing Rights believes these changes will put homes at risk. The current options for vulnerable households are already limited;  the coming changes to SMI will only serve to limit these options further.

Impact of SMI changes on households in NI

Whilst the Department for Social Development have been unable to evidence how many households will be impacted by these future changes, it is possible to cautiously estimate the number of households currently claiming SMI. In their ‘Impact of Summer Budget 2015’ , The Social Security Agency state that in 2014/15, £15 million was spent on SMI in Northern Ireland. If the maximum SMI payable to any household is £120 per week, this means that there are at least 2,400 households in receipt of SMI in Northern Ireland; however given that the average SMI claim is £29.84 per week (according to the DWP (2011) Impact assessment: Support for Mortgage Interest Public Call for Evidence’ ), the number of households in receipt of SMI is likely to be closer to 10,000.

Impact of SMI changes on lenders

Further restrictions on SMI - specifically, the extension of the waiting period from 13 to 39 weeks – could have major negative effects on the capacity of lenders to exercise reasonable forbearance. Within the confines of the current forbearance guidance from the Financial Services Authority, it will be very difficult for a lender to responsibly and reasonably wait 39 weeks before commencing possession action.

Impact of SMI changes on possession actions taken to court

Although possession actions taken to Court has more than halved over the last year, these figures must be viewed in the context of the recent High Court decision in the Bank of Scotland case. In the wake of this case, possession proceedings by many lenders have been temporarily put on hold. It is likely that these proceedings will resume, and that the number of repossession cases will significantly rise, when the issues raised in this case are resolved.

In the mean-time, Housing Rights advisers are reporting that the Court’s relatively low possession caseload means that the administrative speed of the Court has significantly increased. The combination of a 39-week waiting period for an SMI payment; a faster-moving Court system; and decreased likelihood of lenders being able to exercise forbearance during a 39 week waiting period, means Northern Ireland is facing into a perfect storm, which is likely to result in increased numbers of house repossessions in the near future.

SMI help for clients

Housing Rights offers a FREE independent mortgage debt advice service in Northern Ireland. You can call 0300 32 30 310 to speak with a mortgage debt adviser, or visit www.housingadviceNI.org to find out more information or live chat with an adviser. 

Find out more about SMI

Download our policy briefing on SMI.