Support for Mortgage Interest (SMI) is changing on 6 April 2018 from being paid as a welfare benefit to being given as a secured loan.
Kit Malthouse, a DWP Minister, told Radio 4’s Moneybox on 17 March that he was “relatively confident we will be in a good position when it [6 April] comes.” He stated that people who did not apply for the new loan by then will be able to have it backdated.
But many of the numbers he quoted are worrying.
This article looks at the statistics and asks how many people will be able to get SMI backdated – and I suggest three steps the DWP should take to improve this situation.
Figures from the DWP
There are 92,000 people currently in receipt of SMI, according to Kit Malthouse. This is lower than had previously been thought. The current claimants can be divided into five groups:
- those that have accepted the loan;
- those that have rejected the loan;
- those that are currently talking to DWP/Serco about taking the loan;
- those that have been sent a letter by the DWP but who have not responded at all;
- those that have not yet been told about the changes.
Malthouse said somewhat opaquely:
just about 60% have decided to take the loan, decline the loan or are in conversations with [the DWP] about what their decision will be.
So 60% – about 55,000 people – are in one of the first three groups. Obviously, the numbers are changing and as the 6 April approaches more people will be completing the loan documentation. Malthouse didn’t clarify exactly how many people so far have signed up or have declined the loan but the OBR report published five days before said:
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
So it seems likely that there are 20-25,000 people who have so far rejected the loan.
The remaining 40% – about 37,000 – are in groups four or five. Malthouse said that 90% of people have had the first letter about the SMI change. That suggests 9,000 people have not yet been contacted by the DWP and 28,000 have had letters but not responded, perhaps not answering the Serco phone call that is supposed to explain the change.
These are very disturbing statistics
Not many people getting SMI will have a better alternative to these secured loans. The DWP’s original impact assessment said:
We assume that 5% of working age claimants … and 8% of those of pension age will choose not to receive SMI when it is converted to an interest-bearing loan (based on an analysis that indicates these are the proportions of each group who have access to funds from other sources, for example, beneficiaries or parents).
So for more than 25% of claimants to have rejected it already suggests a major communications failure by the DWP/Serco. People are choosing to reject the loan although DWP analysis shows they don’t have access to other funds to make up the mortgage shortfall that will result.
There are stories of pensioners planning to cut back on their expenses or sell possessions rather than “take out a loan to pay a loan” and “pay interest on interest”. The hundreds of comments below SMI will be a loan from April – should you agree to this? reflect these concerns.
These plans seem unlikely to work for long and so mortgage arrears will accumulate. Some of these people may lose their homes if they have made the “wrong” decision here.
Backdating – will this come to the rescue?
Paul Lewis on Moneybox asked Malthouse if the SMI loan would be backdated to April if people signed up later. Malthouse replied:
Yes, it absolutely will
which sounds clear… but he added:
If there has been any kind of mix up, people haven’t opened the envelopes, if we are still having trouble contacting people, then they can apply [later] and backdate.
So it’s actually not clear whether people that have rejected the SMI loan will be able to later change their mind and sign up with backdating. I think it’s essential that the 20-25,000 people who may not have made a good choice because of poor DWP/Serco communication can do this.
The DWP needs to rethink
With less than three weeks before 6 April, I think the DWP needs to accept that its communications programme has gone very badly. In my comments to Paul Lewis on Money Box after Malthouse’s interview, I made three points:
- the DWP should postpone the start date by 6 months and get back in touch with everyone who has not signed up so far;
- improve its communications so they are simpler, clearer and try to answer the many questions people have;
- consider making the SMI loan interest free. This would remove a lot of the suspicion people have about “paying interest on interest”.
UPDATE – new statistics as at 21 March are here: SMI watch – 25 March – no real progress in last week but there is very little change!
UPDATE – on the day SMI ends, I look at what happens if Serco hasn’t phoned you or if you said you don’t want the loan SMI – what happens if you haven’t agreed to take the loan?
Cathy says
I totally agree.Interest free SMI loan would make it so much more acceptable and relieve a lot of the anxiety and stress that has put upon us all.
deni case says
Thank you for this information. A pensioner, I have not yet taken up the government’s ‘kind’ offer even though I have no other means. I cannot bring myself to pick up the phone. In addition I am not well. I sincerely hope Malthouse will hear and take on board your three points because they are absolutely crucial, in my opinion. Otherwise the whole thing will remain a shambles, people will suffer and this government’s shaky credibility is likely to disappear altogether!
Mags says
I saw Mr Malthouse on the BBC Daily Politics a few weeks ago. His repeated, condescendingly dismissive, referrals to the “over 400,00 bits of paper” that had been sent out about his policy and his assurance that those affected had “nothing to worry about” showed how little concern or respect he has for them. Neither he nor Jo Cockburn saw fit to clarify the misleading impression that the SMI benefit “pays the mortgage” of those who are entitled to it. In most cases it pays less than half of the INTEREST on their mortgage: a far cry from subsidising people to accrue valuable assets at the expense of the taxpayer, which is the widely-held misconception. As Deni Case has previously commented, this policy is destined to “remain a shambles, people will suffer and this government’s shaky credibility is likely to disappear altogethe!”
There are two other questions demanding to be addressed: Why has this heartless policy had so little media coverage? And how do the forecast “savings” involved compare with what Serco are being paid for their part in delivering it? In my experience their ‘contribution’ amounts to making repeated, often pressurising, phone calls to those who have not yet requested an appointment with them; an appointment during which they add almost nothing to the scant information provided by those ‘bits of paper’ on which Mr Malthouse prides himself. Shocking!
Kate Cook says
I was at a Money Adviser Group meeting very recently, with someone who writes fact sheets for a major national debt charity. They said that they did not believe there was any provision within the regulations for general backdating. It’s possible the minister was referring to transitional arrangements & late claims from those claimants that lack capacity, but his statement that it ‘absolutely will’ be backdated if claimed late is not, apparently, not backed up by anything in the Loans for Mortgage Interest Regulations 2017.
I agree 100% with your view that it’s “essential that the 20-25,000 people who may not have made a good choice because of poor DWP/Serco communication” can ask for backdating. My fear/expectation is that people will end up applying later in the summer, when their arrears start to increase & lenders are threatening repossession. They will be left with arrears that they cannot repay because the DWP will not backdate their loan payments.
Sara (Debt Camel) says
I think that http://www.legislation.gov.uk/uksi/2018/307/made allows this by allowing the date at which the loan starts to be determined by the claimant
deni case says
In that case, can it be backdated or is this still a grey area?
Sara (Debt Camel) says
The DWP is saying clearly that it can – this isn’t grey anymore. Good!
Lorraine says
Mum has been waiting for the phone call and no one has got back to her. She has been advised that she will now have to pay more per month by her mortgage provider and is worried sick. Is here a way she can fastrack this phone call now – some escalation process. It’s bloody ridiculous.
Sara (Debt Camel) says
The SMI should be paid this month if she hasn’t been contacted. I will see if I can get a phone number for her to call.
Sara (Debt Camel) says
Phone numbers – I guess your mum may be retired but here are both sets:
If the claimant is over State Pension age
Telephone: 0800 731 0469
Textphone: 0800 731 0464
Welsh language: 0800 731 0453
If the claimant is of working age
Telephone: 0800 169 0310
Textphone: 0800 169 0314
Welsh language: 0800 328 1744
Sandra Mann says
I have agreed to take the smi loan and had all the relevant paperwork completed before the deadline , however as yet, they still haven’t paid last months loan amount! I have phoned serco and dwp who both say that they aren’t dealing with payment issues and that Clydebank are paying the loan!! No one will accept responsibility. I have been advised also, that I will receive a phone call back and to date(12/6/2018 ) this has not happened either !! I am loosing Confidence with all involved and feel that by the time they sort this out, my house will be repossessed !! Any ideas? And has anybody else also had these issues?
Sara (Debt Camel) says
Unless you already had arrears or suspended possession order, your mortgage company is likely to be sympathetic whilst this mess get sorted out. Have you told the mortgage lender that you have signed up to take the SMI loan?
yvonne stead says
I’m in the same Situation I’ve called DWP forms I’ve been in for two months nowThey say I will be receiving your phone call in three days time from this date won’t be counting my chickens does anyone have any idea how long it takes before you receive your loan payment
SUSAN TYSON says
Hi, has anyone been able to make a new application for the Mortgage assistance loan? My 39 week qualifying date starts on the 29th June and I have been trying to apply since the beginning of May. No one at the ESA offices seem to know how new applications are made, only the transitional benefit to loan process. I must have rung more than 20 times over the last 2 mths with the usual 45mins on hold before speaking to anyone and then being told different things each time. I have completed four Mi12 forms in total, as the 1st 2 forms disappeared and then reappeared at Norwich benefit office after a further 2 more forms were completed. One of the last MI12 forms was sent by a processor at Clydbank who apparently dealt with these applications. Today I have been told that Mi12 forms aren’t used any more and my records would be sent to Serco to contact me. Serco inform me that they don’t deal with new applications for the mortgage loan only the transitional claims. So round and round I go. I have complained to DWP, my local MP and still can’t get anywhere.
Any advise would be appreciated, thank you.
Sue.t
Sara (Debt Camel) says
Hi Sue,
I have been told this by the DWP:
“The MI12 is still used for new claims of Support for Mortgage Interest (SMI), this has not changed following the move from SMI being a benefit to a loan. The MI12 is sent to you by DWP and you pass it to your mortgage provider or loan company who complete the form and send it to DWP.
If you are entitled to a SMI Loan your case is referred by DWP to Serco who will undertake an informed discussion with you by telephone explaining what the loan is and how it works. If you wish to apply Serco will send you the loan forms to complete and return to DWP. Once you return the Loan forms DWP will inform you of your loan entitlement amount and start payments.”
Delia Hodgkiss says
I totally agree with all the above. I am claiming ESA. Santander are now issuing a Warrant for Eviction due to my arrears. The solicitors for Santander say they cannot withhold the warrant of eviction due to what is now still a 31 week before I can apply for the mortgage interest loan. I have legal representation who will put forward documentation to court with regard to the 31 week wait, but that is only to delay the eviction. The mortgage interest loan will NOT cover all of my interest only mortgage anyway, in fact, it will probably only cover half, due to a remortgage that was not for home improvements. I have contacted my MP and Councillor, who, believe it or not, were not aware of the DWP/Serco loan towards mortgage interest and the wait! I will also have a shortfall on my mortgage when the house is sold of approx £35,000, to which the only answer is to go bankrupt – I also have a Citizen’s Advice Bureau Caseworker helping me with what will ultimately be bankruptcy. I also spoke to Santander shortfall sales team who said they knew nothing of the DWP/Serco loan towards mortgage interest!!!! These are people who are supposed to understand people’s situations. Their ‘Duty of Care’ is ‘making sure you (the mortgage payer) does not incur further debt.
Sara (Debt Camel) says
I don’t like making snap diagnoses on big debt problems, but if you have health problems, are on benefits so you can’t afford the mortgage and have 35k of negative equity, then I am very pleased CAB is going to be helping you through bankruptcy. Too many people have a house repossessed or go bankrupt and hand back the keys then don’t go bankrupt. It is much better to get all the pain over with and have a clean start. Good luck!
Delia Hodgkiss says
Thank you Sara. I think that making the decision to go bankrupt and accept what is happening has already given me a new lease of life. Onward and upwards :-)
Delia Hodgkiss says
Just a quick question: Is the DWP/Serco loan for mortgage interest backdated to the beginning of the 39 week wait, or is it just paid from the 39th week?
Also, if in rented accommodation – why does housing benefit start immediately, whilst the loan for mortgage interest starts at 39th week of a claim?
Hope you can help.
Thank you, Delia
Sara (Debt Camel) says
It is only paid from the 39th week.
The government appears to think that everyone with a mortgage should have taken out insurance to pay their mortgage if they lose their income.
Sharon says
Looking for advice re DWP, had a letter from Child Benefit a month or so ago saying my husband owes just over £600 for overpaid child Benefit. This was around 10-12 yes ago before I was with him. He was a single parent at the time and not working. They said they had written numerous times (we have had nothing, I deal with everything money wise and I would not have ignored this) and to wait to hear from the DWP. They have now written today to say they are now going to start taking money through his wages?? No discussion, no break down of what he owes, why or where from?? Is there anything we can do because they have made no contact and this so called debt is now over 10 years old? And surely with Covid this letter should never have been sent now?
Sara (Debt Camel) says
I suggest you talk to National Debtline about your options for dealing with this – phone 0808 808 4000.
Sarah says
I would like to take this loan up but have had no joy so far in getting a witness to sign the form which the DWP states you have to do on the form. I have had lengthy waits for help organisations, including CAB who said they had a specific legal advisor that they could help me with this at the appointment time I was given. When I got there they told me that they could not do this … referred me to a local legal service who, after three weeks wait and chasing up by the advisor at CAB, they finally got back to me and said they couldn’t get involved in anything financial!?
I rang the DWP again (it has been several times now over the last more than two years) and they were really offhand and unhelpful to me. The advisor literally shrieked at me, “How am I supposed to know that?!! It is up to you to find your own witness”. They give no guidance on it except that you can’t use friends and family. You can’t use advice agencies as they are deemed to be giving financial advice.
Who are you supposed to use? Nobody has commented on this at all, not that I have seen anyway, never mind that it has been a problem and a barrier to them getting the loan. I think this may be potentially a big issue for people that could be alone and isolated due to health/social conditions
Sara (Debt Camel) says
I have no idea why you can’t use a friend. Where does it say that?
A local solicitor will often do this but will charge for it. You could phone one up and ask how much.
Sarah says
Apparently the DWP and the mortgage lender are supposed to give guidance on it but they are not aware of that when you ask them. It forces me into a very bad position and despite frequent communication with my lender they preferred to send me pre-repossession letters despite the fact they are not supposed to do that at the moment. Could that minister of the DWP. Kit Malthouse who I just read about giving information on it and how easy it was a solution perhaps advise who can be my witness when it comes to signing the form – perhaps he can himself … and maybe pay the interest back on the high rate loans I had to take to pay my mortgage with when my house sale fell through twice.
Sorry I have had to split this email up in to two parts as the word count.
Sarah says
They have verbally told me many times on the ‘phone you categorically can’t use friends and family. I think I saw it written down on one of the forms but I haven’t got them in front of me now so I’d have to go through them and check.
Definitely been told this otherwise wouldn’t be in the circumstance I am through choice.
Thanks for the swift reply … there was a second part to my post but I don’t know where it’s gone! Posted twice (this is third counting this).
I think it has been overlooked that this could be a massive problem and why a lot of people haven’t taken it up … they have no-one to ask and perhaps no friends or family.
Sarah says
Found the SMI forms couldn’t upload them disappointingly and amongst the exemptions (for witness) are family, doesn’t mention friends actually on there but I have categorically been told that by DWP staff and various debt advisors, haven’t got anyone I can ask anyway. Very confusing, upset if I’ve been given the wrong information all this time.
Just rang three solicitors they are all closed, but working from home they said that is something they can’t do at the moment – has to be in person and that’s a no no for them their shops are closed.
Sara (Debt Camel) says
Well so far as I know there is no problem in a witness being a friend.
Can you just ask a neighbour?
Sarah says
Neighbour, no, out of the question … as it would be for a lot of people I guess. Don’t the DWP grasp something so basic as people who have serious disability/health issues compounded by an ageing component, not everybody has a bunch friends/trustworthy neighbours they can rely on …
It has to be someone of upright standing I was told, that would be traceable and likely to be around and contactable in a few years time otherwise what is the point really?! Financial hardship means paying a solicitor is not really an option. I strongly think that they should scrap the need for a witness, and I haven’t even brought up the huge factor of more elderly people, and not necessarily older people who are too proud to ask, don’t want anybody to know their business as they are embarrassed and ashamed of being in such a “financially challenged” situation, lets call it, like me I am one of them even if I had friends that I could ask I wouldn’t because there is the possibility of people not liking that you are getting what they refer to as “free money” there has even been that with the furloughed. I’m sure without a doubt most people have made up signatures/forged them because they felt they had no choice because they were desperate, not all of the 20% that took up the offer but some of them. It seems just a formality and it seems a pointless formality.
Sara (Debt Camel) says
[edit – I have merged some bits from your very long comments into one].
So far as I know there is no check on the person who is a witness.
I have no idea if people have forged witness signatures but no one has mentioned here that it has been a problem getting one.
Annette Wooley says
I am disabled at home in my own I take it if your so poorly and on your own you have carers ? My carer signed mine. Could that work
Sarah says
Hi Annette,
Thanks for your reply. I don’t have a carer to sign my form
My mortgage lender said they would send me a cheque for the amount backdated when it was received from the SMI loan as they knew I had borrowed to keep up to date to avoid being repossessed, which they issued court proceedings for previously and then only a few weeks ago. They know my house sale has fallen through 3 times before (last time agent went into administration). They know I have to pay back other loans due to not being availed of SMI loan earlier.
When my mortgage company said they would send me the cheque, (so I could pay off the other debts incurred, a lot higher rate than my mortgage) I asked them for that in writing they said they weren’t able to send what they said in writing. Said they hadn’t got the facilities to do that. Of course not. People don’t want to commit themselves do they.
re “My lender said they would send me a cheque”. Re late SMI loan. It might be best to contact your mortgage lender, I had numerous conversations with mine. They recognised the absurdity of it all. Kit saying it would be backdated, DWP saying it would but they didn’t pay arrears. But if you get into arrears, you can get repossessed, very quickly with my lender.. My mortgage lender know I have got into debt over having to pay my mortgage with other higher rate loans and using my disability benefits.
Since then, I had had a call back from Scope saying they don’t know of anyone who had been successful in having SMI backdated. When I asked them how many of them they knew who had tried then, there was no answer forthcoming. I think it was just an assumption that it wouldn’t happen I was given, not an actual fact of experiences.
Annette Wooley says
Hi I’m not sure if this is the correct place but I applied for the mortgage loan last September, they lost the paper work etc I continued to pay my mortgage whilst waiting for them to sort out replacement forms this was done and it now at clydebank waiting to be processed i asked when they resent sent the forms out if it could be backdated to September and paid to me as I have been making the payments, they say it can be backdated but not to me it will go to my mortgage provider, well thats no use, why would I get into debt£4000 when my mortgage payments are up to date ? I have used money and been very short each month so I have asked for the backdated amount come to me, the lady on the phone said she’s never heard of it and she’s 99% sure it would only go to my mortgage co. Any advise would be appreciated thank you
Sara (Debt Camel) says
I don’t think they will send it to you. But is SMI covering your whole mortgage?
Annette Wooley says
Yes, but I applied in September and they lost the forms so when the new forms got done they said as I had been.paying my mortgage in the meantime so I didn’t get into arrears they would backdate the amount from September. Today when she said no we send ithe arrears from Sept to.the mortgage Co i said that’s pointless why would I say OK send the arrears to the mortgage Co? And have that debt? When I need it to cover the money I have used waiting for you to redo the forms?
Does that make sense?
Annette Wooley says
Hi sorry i have not been back to reply sooner waiting for letters, so i was awarded the smi I think August last year , i waited but the lost my claim ,I paid the mortgage whist I was waiting for the smi, I got a call to say it would be paid out along with £3300, that is the money that has been sent to my dwp account whilst I waited the lady, there is a manager a the dwp that can see i paid my.mortgage and the acrued amount was Purley money that was meant for the mortgage but it wasnt set up. I have historical arrears on the acct, many year old and there is an arrangement that has never failed,
The manager at the dwp asked me to confirm with my mortgage co that I coukd have the money..thry have said no, but if that happens I will be paying fior my past year twice, and allowing 3,000 to go to the lender when its on a loan that I have to pay interest on. I might aswel ask the dwp to close the 3 grand down,i have explained that paying the mortgage for a year was hard but I was told any payments i made woukd be credited back to me.
Am I being stupid? It seems I am in the middle. The morgage co want to pay my historical arrears off with a loan in my name, surely that can’t be right?
Thanks
Annette
Sara (Debt Camel) says
this doesn’t sound fair.
I suggest you contact your local Citizens Advice for help to challenge this.
Delia Hodgkiss says
Hi this cannot be right. I would advise you to contact your local MP – email them and also get in touch with either a solicitor or citizens advice. I would also advise that you keep good records of all correspondance with anyone – email is a good way to keep these records. I do hope you manage to sort this out.
Annette Wooley says
Thankyou for your reply i feel like I’m grabbing but I’m not, I kept the mortgagr agreement up to date, but they want it to pay arrears already in an arrangement from 2012, surely the backpay is to replenish the money inhave paid over the year whilst the dwp lost my accounr ? I was thinking of going to the financial ombudsman?, but the dwp won’t start payment of my mortgage unyill this acrued amount is sorted out, im reallynpoorly been in bed 8 years with 6 failed dpinal fusions now ruddled with arthritis. I havnt got the energy really but I feel its wrong thanks Annette
Sara (Debt Camel) says
I think it sounds wrong. Please get help from your local Citizens Advice – this is usually over the phone at the moment.
Sarah says
Hi Annette,
I am sorry you are in the situation, am in the same situation, contacted Citizens Advice but they refused to help saying they couldn’t get involved in anything financial?! Also contacted my MP, they said they couldn’t help either … also contacted at least 11 solicitors who all said they couldn’t help (an advisor through debtline also tried a few on my behalf to no avail either).
I think people mean well giving generic advice on here, like contact CAB or MP but when they haven’t actually been in the situation and tried that advice themselves and just come up with brick walls after brick wall it’s difficult for them to understand what it’s like in reality.
Needs someone with some authority actually taking it up at the root issue, I asked my advisor to contact Kit Malthouse directly to seek a solution as was getting nowhere and obviously been a long time now … had tried all the suggestions ie solicitors, Citizens Advice, MP, local (free) law centre, all to no avail, several times (and recently had major surgery as well, on top of other health issues), he didn’t do it and no reason why given to me.
Sarah says
My previous advisor did nothing with my paperwork for over 9 months then went off sick then left I was told. The manager has taken over but sadly got nowhere with my mortgage – went on holiday last week, I still had to find to pay my mortgage like you with other loans, going without, etc. It’s difficult not getting even basic needs met, like food, etc never mind bills or help when there is no end in sight.
I really do empathise with you.
Delia Hodgkiss says
Have you made a complaint to the DWP about this? I would make a formal complaint to them and also get in touch with citizens Advice. I dont know how old you are, but you can also contact Age UK Advice Line: 0800 678 1602. I would really phone them up and ask their advice, especially if you are ill. Do you have a family member who can help you contact someone to speak to?
Annette Wooley says
Hi im 50, I have put a complaint to the financial ombudsman, hopefully I will get somewhere, the ridiculous thing is the mortgage co won’t get the money either way 1 because I have kept to my arrangement and 2 sadly I would rather close the loan down than havea loan to pay off historical arrears.
Annette Wooley says
Hi, so did you pay your mortgage while you were waiting for your smi payments to start? And your mortgage co wants the acrued money sat with the dwp?… are u in arrears with your mortgage,?..
I have gone to the financial ombudsman she said it something they woukd look at.
Sara (Debt Camel) says
I suggest complaint to the DWP as well as the Financial Ombudsman. Because I think both the DWP and the mortgage lender have not been helpful here.
Delia Hodgkiss says
I have been through a similar experience with DWP. I strongly advise you to put in a formal complaint through the correct channels .You can do this yourself. Just keep records and follow up if they dont get back to you.
Sara (Debt Camel) says
You can indeed complain to the DWP yourself, see https://www.gov.uk/government/organisations/department-for-work-pensions/about/complaints-procedure. I just normally suggest people get help from their local Citizens Advice to do this.
Annette Wooley says
I have been looking for a link thankyou very much 😊
Annette Wooley says
Hi thankyou I made a complaint tk the dwp and the financial ombudsman. Just waiting now.
Thanku