The Office for Budget Responsibility (OBR)’s Economic and Fiscal Outlook paper, published today with the Chancellor’s Spring Statement, has this statement:
DWP has told us that all current claimants have been contacted about the intention to convert their [Support for Mortgage Interest] award into a loan and of those that have responded, over half have indicated they are not interested while less than a fifth have said they are. Only around 10,000 claimants have so far agreed to take up the loans from April, 90 per cent short of the 100,000 expected by the end of 2018-19.
Support for Mortgage Interest (SMI) helps people who aren’t in work with some of their mortgage costs. About half the people getting SMI are pensioners and many of the rest are disabled. That only 10,000 have so far agreed to take the new loan is a shocking admission by the DWP.
UPDATE October 2018 – new statistics show 96% of people have been contacted and 70% of them have rejected the new loan.
As I have argued in SMI will be a loan from April – should you agree to this? people getting SMI should not reject the new loan unless they have a better option.
I don’t think many people do have a good alternative to the new SMI loan – certainly not over half of them!
Why have so few people agreed to the new loans?
10,000 is an alarmingly low sign up rate. I think this is due to the way the DWP has handled this:
- It has been too slow in contacting people. The change to a loan was supposed to happen from April 6th, but the DWP has been forced to introduce some transitional arrangements for people are in the process of signing up for the loan.
- People are confused and suspicious about Serco’s role.
- People are worried that the loan may look cheap now but they can’t trust Serco or the government not to later change the rules, with student loans often being mentioned.
- Serco – who have no experience in administering loans, let alone secured loans – seems to have done a very poor job of explaining the details of the loan to worried and often vulnerable people.
Some facts about the new SMI loans which I don’t think the DWP/Serco has managed to properly explain to people:
- there are no fees to set up the loan and no credit check – you won’t be refused this loan;
- you don’t have to make any repayments to the loan unless you want to, even if later your situation improves so you could afford to;
- the interest charged on the SMI loan is linked to the “gilt rate” which is a low rate the government itself borrows at – this is always likely to be less than a normal mortgage rate;
- if there isn’t enough to repay this SMI loan when your house is sold, the rest of the SMI loan will be written off;
- the loan is from the government, not from Serco.
People may lose their homes because of this
I have heard too many people say they are too worried by the idea of a loan and that they will just have to manage without. Everyone getting SMI is already managing on a low income – cutting back permanently to pay the extra mortgage costs may not be possible for many of them and they will end up with mortgage arrears.
SMI doesn’t cover the full cost of most people’s mortgages, so many people will already have some mortgage arrear and, in some cases, the mortgage lender may already have a suspended possession order. How long will it be before the first people lose their homes because of this SMI change?
deni case says
I have not yet signed up. I still can’t trust myself to be civil and keep my bp down. Also too many unanswered questions yes. A pity the 90000 -odd people who haven’t taken up the government’s ‘generous offer’, did not sign the two petitions going round previously. It really feels like there must be a legal loophole in all this although I guess someone somewhere has done thorough homework on it.
Can you tell me what the line “you don’t have to make any repayments to the loan unless you want to, even if later your situation improves so you could afford to” above means exactly, please? Thank you.
Sara (Debt Camel) says
“you don’t have to make any repayments to the loan unless you want to, even if later your situation improves so you could afford to”
With normal loans you have to make repayments: weekly, monthly, after a years delay, only pay the interest… there can be lots of different options but at some point you need to repay it. This SMI loan isn’t like that. If you have it for a year then get a great job and don’t get benefits anymore, you don’t have to start repaying the SMI loan.
“too many unanswered questions” ask them here! There is no such thing as a stupid question :)
Sheila Kean says
I am with you all the way, this Government is scraping the bottom of the barrel with SMI being withdrawn with no concern for thousands of low income people.
I am not signing up either, I have only ever had one loan and that is my Mortgage and I refuse to have another. I will pay my interest myself, even if I have to go without, I have already turned my central heating down and cut back on a few other things, if I lose my house I lose it. I am almost 82 and if this is the way DWP want to treat me then be my guest.
I agree with others that are not taking up with offer from DWP.
Sheila Kean says
I don’t have a clue what you mean and my blood pressure is going up
Sara (Debt Camel) says
I’ll try to find the answer to any questions?
Cathy says
Like myself,I think a lot of people may be scared of signing the charge form,as I do not understand the consequences I.e. when and how will it be lifted.Can you explain this please.
Sara (Debt Camel) says
When you get a mortgage, the lender takes a “charge” over your house. This is recorded at the Land Registry.
If you later get a secured loan or a second mortgage, you are giving the lender a “second charge”. This will also be shown at the Land Registry. This SMI loan is a secured loan and you are being asked to complete charge documentation allowing this new charge to be added.
When your house is sold, charges are satisfied in the order they were added. Say your house is worth £150,000 and there is a mortgage for £142,000. If the SMI loan then totals £4,000 the sale of the house will pay off the mortgage and the SMI loan. The solicitor handling the sale will ensure these are paid from the money the buyer is paying.
If your house only sold for £145,000 the mortgage would be paid in full as it was the first charge but there isn’t enough to repay the SMI loan. The balance of the SMI loan will then be written off by the government and you (or your estate if you have died) will not have to repay it.
The other way the charge can be lifted is if you repay the loan. There is no reason to think the government will be difficult about removing a charge if the loan is repaid – this is not something anyone should worry about.
Cathy says
Thank you,so if I pay off the loan in 3/4 years will I need to inform Land registry myself.Or is it automatically done for me,If so what form should I expect to receive ?
Sara (Debt Camel) says
The DWP should remove the charge form the Land Registry. I can’t really guess what communications you will get from the DWP about this but I do not expect it to be a difficult problem. There are many things I don’t like about this Smi loan but concern about how to remove the charge is not one of them!
deni case says
Oh but I do worry. My state pension is my only income and my house is all I have. At the moment I’m on a low fixed rate mortgage that will change in 2019 to sv. I will have to sell before or when it does as I can’t afford to live purely on state pension and dwindling paltry savings much longer. As debt has piled up, it’s doubtful I will be able to buy anything outright once everything is paid off. To have to give this government money, in addition, is intolerable. The way the world..and this government…is going, everything will be going up and the poor and vulnerable will suffer even more, that much becomes clearer everyday. Who knows what this evil gov will hit us with next. Things can only get worse.
G Wallace says
If you live in a shared ownership HA home, you cannot obtain a loan secured on HA property but Serco DO NOT LISTEN!!!!
Paul Turner says
I’ve signed up for it. I can’t afford to pay the interest myself. The way I see it is, as long as Dwp stick to there agreement and we don’t have to pay it back unless we have enough capital in our homes, then it’s a good deal.
There’s nowhere else you could get a loan as good as this. Chances are, the majority of people who take the loan out, won’t be able to pay it back and won’t have enough capital in there homes to pay it back.
It does seem a bit strange though that Dwp are taking a big risk that they won’t be paid back. It seems a bit too good to be true.
gmack says
DWP has told us that all current claimants have been contacted about the intention to convert their [Support for Mortgage Interest] award into a loan
Thats a lie for starters because i am a current claimant and they the dwp haven’t contacted me
so whats my position now?i’ve tried reading the amendments but it’s all jibberish to me
do i get an extension date later than the 6th april until they make contact?
Sara (Debt Camel) says
The latest statistics are in here: https://debtcamel.co.uk/smi-water-25-march-no-progress/. That shows there are 5,000 people who have not yet been sent a letter. I agree the “transitional arrangements” are as clear as mud. I will try to get some clarification.
dennis dutton says
for the last 3 years i have been trying to sell my property wishing to move closer to the mainland were the rest of my family live if i incur a changeable loan on top of my main mortgage (1st charge) i am unable to move if a get a buyer this would now happen with SMI ,i am the holder of an interest only mortgage now the imposing change incurs more interest on a interest only mortgage. This is miss selling ? (mainland-isle of wight)
Sara (Debt Camel) says
“if i incur a changeable loan on top of my main mortgage (1st charge) i am unable to move if a get a buyer this would now happen with SMI”
When you sell your house, the mortgage will be repaid first, then the SMI loan.
How much equity do you have? Are you asking for an unrealistic price if you have been trying to sell for three years? When does your interest only mortgage end?
Anne Walker says
Well I did sign up and month no. 3, NO payment yet. Which means I have to find an extra £80 a month to cover the mortgage interest on top of my normal payment. I’m on ESA and can barely afford to get by as it is… rang them, actually got through, form received and no reason on screen why it hasn’t been paid so a promise to call back in 48hrs. It’s now day 10, no call back.
Kiddie says
Dwp Serco paid outs for 3 months and then stopped payments . Saying on June 6 th we cancelled the loan ! Which we did not ! And deny strongly ! Spoken to dwp every day for 10 days . Every day promised a phone back and no call ever came resulting in phoning up again the next day . I am in fact on the phone now trying to get thru to anyone who can sort this out . Our mortgage company has waited 3 months to tell us the payments are not being made and we’re now in debt and adding to the extra stresses of being a full time carer to my blind diabetic husband and my brain damaged autistic daughter ! We have been screwed over ! Taken for a ride ! Let down ! Lied too ! Given the run around . Serco is not to be trusted. .dep is not to be trusted . This is all some big con ! I do endever to keep on keeping on trying to sort out the massive let down of a trusted safety net ! Where will my disabled family live if we lose our home ????? The council are already saying we won’t be entitled to any help !! Beware .
Sara (Debt Camel) says
CAn I suggest you get in touch with Shelter (https://england.shelter.org.uk/get_help) or your local Citizens Advice asap.
The council may well be wrong that you wouldn’t get any help, but the priority is to keep you and your family in your current home.
steven long says
For all those that are struggling like myself
Please sign and share
Thanks
https://petition.parliament.uk/petitions/234864?fbclid=IwAR0bkATm1MC02phVuQmGMVh4qXlzqjI-K8RsbLch3cfq9jbN9-VNuXxrWoA