Support for Mortgage Interest (SMI) helps some people with the cost of their mortgage if they aren’t working.
Since 2018 this help has been paid as a loan secured on your house, not a benefit, see the gov.uk page on SMI.
But this loan is cheap, you don’t have to make any repayments to it until the house is sold and it does not show on your credit record, so this is not as bad as it sounds.
How much help does SMI give?
If you lose your job, you can’t claim SMI for 13 weeks if you claim Universal Credit – this used to be 39 weeks but it was reduced in April 2023. If you retire and get Pension Credit, it is paid immediately.
The help SMI gives will probably be less than your monthly mortgage payments:
- SMI only helps with the interest you pay on your mortgage not the capital repayments.
- There is a cap on the maximum amount of a mortgage you can get help with. This is £200,000 for working-age claimants and £100,000 for pensioners.
- The amount of SMI you are paid depends not on your mortgage rate but on the average interest rate for mortgages. In mis 2023 this is 2.65%. If you are paying a much higher interest rate, you will get a lot less help than the amount you are charged each month.
So SMI is not a very helpful benefit – too little and too late!
But if you can’t pay the mortgage, even a little help can be better than nothing. So you should seriously look at taking SMI, even though it is only a loan.
How the SMI loan works
How the loan is calculated
Each month the loan will increase by the amount that the government is paying to your mortgage provider.
There is no credit check for this SMI loan, so you won’t be refused even if you could not remortgage as you have a bad credit record.
The governement adds interest to this loan. This is charged at the OBR’s forecast of the gilt rate – this is the rate the government can borrow money at. In mid 2023 this is 3.28%.
Repaying the loan
You don’t have to make any repayments to this loan.
This applies even if your finances improve, for example if you return to work. At that point, SMI will stop, but you don’t have to make any payments to the loan you have already been given.
The SMI loan doesn’t appear on your credit record. As a result, not making any payments will not harm your credit score.
The loan will be repayable when your house is sold, transferred to someone else, or on death.
If there isn’t enough money to repay the loan, the rest will be written off. This loan cannot become a problem for you if you sell your house or for your your children after you die.
But if you want, you can repay the loan, or part of it, at any time, with a minimum repayment of £100.
To accept the SMI loan offer
The DWP is offering this loan to you. The legal terms for the loan arrangements are described in this document.
To accept the offer, you have to sign the loan agreement and a charge form. If the house is jointly owned and you live together, your partner also has to sign.
The charge will then be registered at the Land Registry.
Should you agree to take the loan?
A lot of people find the idea of getting a loan to pay their mortgage very worrying. “It’s not right to get new debt to pay off other debts” is a common comment.
As I debt adviser I would normally agree! But this SMI loan is very unusual because it is cheap and you don’t have to make any repayments to it. So you need to think about your situation and make a practical decision.
You may hate the idea. But this SMI loan is a good option for most people who can’t pay the mortgage for five reasons:
- it is much cheaper than borrowing elsewhere;
- you don’t have a job so you probably can’t remortgage;
- if you don’t take the loan and mortgage arrears will accumulate, your house may be repossessed;
- you don’t have to make any repayments to this loan, even if you start work;
- it can’t harm your credit record.
Do you have a better option?
Do you have savings you can use? Most people don’t have much or they wouldn’t be able to claim Universal Credit or Housing Benefit.
It’s also not a good idea to use all your savings to delay the point at which you need the loan – that will leave you with problems if any repairs are needed to your house or if you have an unexpectedly large bill, so make sure you keep a reasonable emergency fund.
Could relatives help you out? Don’t let them borrow money to help you – this SMI loan is massively cheaper than they could borrow at and they would have to make repayments, you don’t with the SMI loan.
Planning to cut back elsewhere, or sell things from your house, could turn out to be very stressful and difficult – you may end up with mortgage arrears.
If you are unsure, go to your local Citizens Advice. They can help you look at the details of this loan and at the rest of your situation:
- for some people there may be other benefits you could claim;
- there may be better options for handling any non-mortgage debts you have.
Mortgage problems? what are your options
Options when you cant pay bills & debts
Selling the house – a hard choice
Brian Caffrey says
I received a letter some days ago, dated April 5. In it they state that because I am now £1.38 over the minimum to live on, I am no longer entitled to Guaranteed Pension Credit, and have been switched to Savings Credit. Distracted by health and other issues, I only just came to realise this morning that the £30.12 paid weekly to my lender has stopped, that from somewhere in Cuckooland, I am supposed to find a replacement £130 a month, which most certainly will finish me off. I am still in recovery from major heart surgery, very tired, and now they have dumped this on me. I have no one to turn to, and the prospect of appealing is terrifying for me, as I have mental health issues too.
I’m not gay, but most surely have had enough, and thinking of doing a Dale Winton. After all, they do want me dead, so now, at age 71, my life in penury will not be worth living, so I may as well give them what they want.
Sara (Debt Camel) says
It is dreadful having to sort this sort of stuff out when you are ill, but I suggest you need to get to your local Citizens Advice as soon as possible to see if you should still be entitled to SMI and if not, what your options are.
Brian Caffrey says
I surely cannot be the only person to have received such a miserable letter, advising change to Savings Credit, having been advised that they no longer qualified for Guaranteed Pension Credit.
I had finally posted the loan application, duly signed, together with the legal charge document, also signed on March 16, and a few weeks ago, received formal acknowledgment, at which time I assumed that the new arrangement was in place, and ready for implementation.
I have however received no such mailing from the SMI loan department/ people, and now remain in weekend limbo torment.
Thus I have absolutely no idea what the Hell is going on.
Elsie says
Hello Sara,
I thought you might be interested to learn that not even a month has passed since the introduction of the SMI/LMI and our mortgage company is currently reviewing our mortgage with a view of taking us to court to get us out! We ran up arrears when my partner first became ill and our mortgage company gave us a payment holiday until the SMI started. The SMI didn’t meet our full subscription, so we made up the full mortgage subscription ourselves plus, initially, a token amount towards the arrears. Following advice, we’ve been paying off our arrears at the Norgren level (arrears settled in full by the end of our mortgage terrm). Our agreement is usually reviewed every 6 months and, after being put through the wringer, a payment plan is agreed. This time though, it seems from the calls so far, that due to the unknown amount that we will incur as the SMI loan/interest, the mortgage company intends to proceed to court as I turned an AVS down. Last year, the mortgage company turned down a grant that needed a non-financial charge too!
Sara (Debt Camel) says
which mortgage lender is this?
I think you need to talk to the debt adviser/solicitor that helped you get the Norgan repayment agreed as to what your options are.
Elsie says
Hello Sara,
Thanks for your reply. I’m working on professional advice and also seeing our MP. I’m reluctant to name the mortgage company just yet.
Sue Fletcher says
Hi Sara.
Some time ago I wrote that I had not heard anything from the DWP to say whether or not they had actually got my forms…as expected they said they had but could not tell me any more as there was a “backlog” but could not state how long this was. Well yesterday I had a letter from DWP to say that from 10th April they would no longer be taking money from my “allowance” to pay the mortgage to Halifax. It seems that after a phone call to Halifax (by me) that the money IS being paid direct to them from DWP – the fact they haven’t told me I have qualified for the loan seems to have gone by the by. Is this usual? Do they not tell you that you are getting the “loan”? I thought they might have notified me that everything was going through OK But perhaps I am hoping for a bit too much from them!
G Wallace says
If you are a shared ownership HA tenant, the HA does not allow loans to be secured against home???
Sara (Debt Camel) says
I’m going to tell you what I think will happen here, but I am not an expert in housing law and I suggest you call Shelter’s very good housing helpline: https://england.shelter.org.uk/get_help to discuss this.
There is a provision in the SMI rules (paragraph 7.19 in http://www.legislation.gov.uk/uksi/2017/725/pdfs/uksiem_20170725_en.pdf) that where there is another owner of the property (the Housing Association in this case) a charge won’t be used but you will be asked to sign “an equitable charge” instead. The HA doesn’t (I think) have to agree to this. The end result for you will be much the same as a charge would have been.
Sue Fletcher says
Hi Sara
Good news – I have FINALLY received my letter confirming the SMI loan WILL be paid (direct to the lender) but only after I had to get on to my Mortgage lender (yesterday)….funny that eh? Still at least I now know for definite where I stand debt wise. Thanks for the advice you give, not only to me but everyone on here. X
B Caffrey says
hello Sue
For precisely the same reason that the Pension Service’s letter had been very unclear, and because of concern whether I possibly no longer qualified for a loan (because of the careless ambiguity of their words,) I was in torment from Saturday morning until Monday morning, when I was finally able to make contact with the Pension Service. So, the loan payments will be forthcoming
With rubbish rates of pay, it seems that the Pension Service cannot afford to engage articulate people. Their last pair of letters both bore incorrect telephone numbers
Harry says
I know it’s slightly off thread but if as result of losing SMI and being changed to the loan scheme you have lost Pension Guarantee Credit and moved to Pension Savings Credit you may be aware that you’ve lost the benefits that you were previously entitled too. However, please note that it is open to you to apply to your Council for Council Tax Support and to the NHS for help with health costs on form HC1. If you have “low Income” you may still get some help.
RMD777 says
Reply ref. Harry.
Hi,
Are you saying SMI is being automatically replaced by LMI? And this causes Benefits to change? I am not of pensioner age if that makes a difference. If I was are you saying you lose Council Tax & health cost support?
Thank you,
Russ.
Sim says
Harry, The loss of Guarantee Credit is a pain to many who find they are a few quid above the £163 single or £248 couple limit.
Have paid years of council tax and had to pay for dentist. Cost me more than that few quid!
The withdrawal of SMI was just too much as I only had State Pension to cope on.
Driven to do something I phoned DWP and applied for Pension Credit. Lots of questions later they confirmed I qualified for Savings Credit.
A few weeks passed and their new assessment gave both Pensions Credit Savings Credit and Pension Credit Guarantee Credit. The Guarantee
was worked out by adding Housing Costs for the weekly interest that SMI no longer pays since April so £163/week plus £12 interest I pay my mortgage provider per week meant my State Pension of £165 now gets the guarantee.
So contrary to some pessimistic posts about SMI withdrawal loosing people other benefits this did not do that.
Gareth Morgan says
“The Guarantee was worked out by adding Housing Costs for the weekly interest that SMI no longer pays since April so £163/week plus £12 interest I pay my mortgage provider per week meant my State Pension of £165 now gets the guarantee.”
This is not the case. Unless you have extra needs, because you are a carer, disabled or have some housing costs like ground rent or service charges, you shouldn’t get Guarantee Pension Credit on those figures.
Sara (Debt Camel) says
I agree with Gareth. In general, housing costs do not form part of the Guarantee Pension Credit eligibility calculation.
I accept the point that someone with PC may be able to manage a very small monthly mortgage payment and so manage without the SMI loan. But the points you seem to be making about general benefit claims are not widely applicable.
Anyone who has benefit issues, including pensioners, should consider going to their local Citizens Advice for a full benefit check-up – are their current benefits correct? is there anything else that they could apply for? The SMI changes may make this more urgent for some people,
Sharon says
Just wondering about a scenario….
I have accepted the loan and it has started paying towards my mortgage interest now.
If I were to move into my partner’s home, but keep the flat going and possibly rent it out for while, would I still be able to continue with the loan until I sold the property? I would no longer be in receipt of ESA if I were to move into my partner’s property. But as it is now a loan rather than a benefit, I can’t see why I wouldn’t be entitled to continue with it? In fact I would’ve thought it would be in the DWP’s interest to continue with it…
The person I spoke with at the DWP wasn’t entirely sure!
Sara (Debt Camel) says
Well obviously you wouldn’t get any more SMI loan payments in that situation. But I don’t think you would be obliged to repay the SMI loan, although that might well be sensible as you would have to get permission from your mortgage lender to let out a property – that may be less likely if there is another secured loan on it.
Poppy says
Will we get notice when SMI kicks in as I have heard nothing back from anyone?
Cathy says
They have continued to pay my mortgage lender from April 9th.at the same rate as before without letting me know. However I received a letter today May 10th from Dwp informing me of this, they say a separate letter is to follow explaining the interest rates.
I would advise you check with your mortgage lender !
Lynn Jones says
I have been getting SMI it a joint mortgage I have moved out on trial separating would my partner be able to get it in his name or could I carry on getting in my name were both unemployed
Sara (Debt Camel) says
It sounds as though your partner is likely to qualify for SMI. You will presumably need help with your housing costs from Housing benefit or universal credit – I suggest you both go to your local Citizens Advice and they will look at both your benefit options.
gmack says
finally received the letter and booklet from dwp asking that i provide them with a phone number so they can give it to serco and obviously keep a record of it for themselves and my question is as follows, is it mandatory to give the dwp a contact number so they can pass it on to serco or can i just do nothing as do not require one of their loans
Sara (Debt Camel) says
If you don’t want a loan to replace the SMI then you don’t have to give a contact number. Do you have another plan for how to manage without the SMI?
gmack says
At the moment it’s only £12pw so the plan is do nowt
Elizabeth Glover says
I have been moved to SMI loan scheme and was on Income support ESA support group and receive a small Occupation pension. Now I find out because the Help with interest SMI, my ESA has been converted to contribution based and I loose council tax benefit, free prescriptions and NHS costs. All because of this new change to loan….. It puts me in a position that contributions based worked out slightly more a week. I am so much worse off I have disability so my prescriptions amount to 14 a month, I have abdomen tooth so can’t afford the dentist and my eye test is due dam dam this conservative government . I just read that if you are on contribution based ESa you are not entitled to SMI does this mean the loan stops.?
Sara (Debt Camel) says
Hi Elizabeth,
I think you need to talk to someone about your benefit situation and what your options are – I suggest your local Citizens Advice. I am not sure how you can have been moved to contributions based ESA.
Ja1234 says
Hello Sara,
I applied for the lmi about 4 weeks ago, I’m still to hear back. I’m assuming that I will be entitled to it as I’m on income support, a career and receive child tax credits.
My partner has just moved in, he is not claiming benefits and though he is employed through his own company he is unable to work and signed off sick (he did work for 3 weeks back in April but that is the only work he has been able to do since the end of January).
Will I still be entitled to receive lmi?
Sara (Debt Camel) says
I can’t advise how your income support may be affected by him moving in. Sorry but I think you both need some benefit advice – go to your local Citizens Advice.
gary says
Hello Sara
My wife and I are carers and also guardians to small children, we ent back all the loan papers back in march and received a letter from the DWP saying all documents had been received and basically we will be in touch, we recently had a phone call from the mortgage provider saying they have heard nothing since 9 April from DWP when they were informed that the payments would stop, no payments have been made and we are now 2 moths in arrears so we phoned the help line to be told its a backlog caused by Clydesbank so we have to deal with them and cannot contact them ourselves, this is done through DWP so we are awaiting a call back. At no time do we remember authorising any share of information with any third party and are finding the delays and lack of comunication from DWP very alarming. We had contacted our MP who is eager to help.
John says
I am in a similar situation – giving up work to look after my two disabled kids. I must have been lucky I sent my form in late just before April, received acknowledgment of receipt quite quick then heard nothing until a couple of weeks ago. They have payed up until April and then started the loan
Sim says
Around half those affected by withdrawal of SMI in April are pensioners likely to be on a low income but maybe over the £163 single or £248 couple Pension Credit Guarantee limit.
Check with the DWP as they may add housing costs on to the £163 or £248 meaning you can still get the Guarantee as this increases the minimum the government says you need to live on each week.
That guarantee really does help! It reduces council tax and other health expenses like dental charges which many pensioners with a mortgage may still be needlessly paying since SMI stopped in April.
Gareth Morgan says
No. If you qualify for a loan, only because you would have received a benefit if SMI had still been included in your assessment, then you will not get any of the ‘passported’ entitlements that you would have received if benefits were actually in payment.
Sim says
Besides the point! Particularly for pensioners wary of the loan and second charge on their home. They mostly prefer to struggle on and pay the
interest themselves. So if you live on only the state pension but because you contributed forty years NI payments with Serps and Graduated
under the old scrapped forty year rule, find you are just over the £163 or £248 so lost the Guarantee where others who made less than 40
years NI payments rather unfairly, get the Guarantee, go for it!
I did and with the Guarantee save on council tax, health & dental charges and need not ask for the SERCO loan.
Gareth Morgan says
I don’t understand what you’re saying. If your income is too high, you won’t get the benefit. If it’s not you will. You’ll only get the add-ons if you get the benefit.
Sim says
Sarah, Sorry about the spacing error in my previous post!
Sara (Debt Camel) says
no problem, but like Gareth I don’t understand your point. I suggest you should go to your local Citizens Advice and they canhelp you look at your full situation.
Cathy says
Hello Sara,I am in receipt of Smi loan now.Can you tell me if my circumstances change and no longer get this,when will I be expected to pay back loan & interst ?
Sara (Debt Camel) says
No, you won’t. You only have to repay the loan when you sell the house.
Cathy says
Thank you.
Sim says
My point is if you are a pensioner with a small remaining mortgage and are considering the loan you may decide you could
cope without it if you can get the Guarantee Credit.
5 October 1953 and earlier You’ve already reached the eligible age to claim Guarantee Credit.
You can claim Guarantee Credit if your weekly income is less than £163 if you’re single, £248.80 if you’re a couple.
BUT DWP WILL ADD YOUR WEEKLY MORTGAGE COST TO THE £163 £248 SO YOU MAY QUALIFY FOR THE GUARANTEE IF YOUR
STATE PENSION IS HIGHER THAN £163 £248.
If your weekly income is higher than these thresholds, you may still claim Guarantee Credit if you meet one of the following
criteria: you have a severe disability,you are a carer; you have to pay *HOUSING COSTS LIKE A MORTGAGE!
Also people who’ve reached State Pension age before 6 April 2016 are eligible to claim the Savings Credit part of Pension
Credit. That too can help.
Clearly this won’t help those already getting the guarantee and still struggling to cope with very high mortgage.
They will accept the SERCO loan and let SERCO take any loss when the home is sold!
Sim says
Gareth Morgan says
July 1, 2018 at 2:44 pm
I don’t understand what you’re saying. If your income is too high, you won’t get the benefit. If it’s not you will. You’ll only get the add-ons if you get the benefit.
=========================================================================================
I’m saying “too high” regarding Pension Credit Guarantee is assumed to be income over £163 single and £248 couple and some pensioners are put off claiming, when they should not be, because they are a few pounds over those criteria. Particularly those who reported on debtcamel that they lost their Guarantee when SMI was withdrawn in April should ask DWP to look again whether their weekly mortgage
interest payments were taken into account by DWP in making that decision.
Gareth Morgan says
What date were you told that mortgage interest counted? Some people got letters saying this before the loan scheme came into force.
Sim says
On 14 June I wrote this to my local MP.
Dear MP,
Are you aware that being just above the Pension Credit Guarantee of £163 is a nightmare
for many older pensioners. Generally they may be a few pounds or even pence above the
£163 guarantee amount by having fully contributed to National Insurance under the old
now scrapped 40 year NI contributions rule. They worked through times when it was common
to not have pension rights with employers. Many will have given substantial service in the armed
forces such as the 15 years I served leaving just prior to 1975 when in that year it would have
gained a good pension.
We now get hammered for Council Tax, excluded from Ernest Bevan’s 1948 support for mortgage
interest rate withdrawn in April hitting thousands of poorer home owning pensioners. No help
for health costs such as dental treatments. All these costs can be overwhelming and exceed
the few pounds income over £163 several times over.
The present £163 Guarantee rewards those who made less or no contributions but it really is a
cliff edge for those who did contribute more but now wished they had not!
Can the Government please introduce a less drastic transitional slope rather than this cliff edge
Sim
The DWP decision of 27 June 2018 included housing costs for mortgage or home loan and the Pension Credit Guarantee.
Sim says
Typo SHOULD READ Ernest BevIn
Helpfulharry says
Before April I commented on this site that my interpretation of SMI rules was as Sim is now describing. Ie. You would still get SMI after April if A) If you got SMI pre April and B).your income was below your applicable amount after April (when housing costs where removed from calculations). DWP & Gareth disagreed with me. DWP letter dated late March gave both SMI and PC guarentee but one dated early April took it away we personally then chose to accept the loan.
Sim says
I no longer get SMI. I now pay my own monthly interest. I regained Pension Credit Guarantee despite my state pension
being £165.29/week because DWP added an amount for the weekly equivalent of my mortgage interest onto £163
which gave a higher amount the government says you need to live on.
Sim says
John Healey: Scrapping Mortgage Help Scheme Will Push Millions Closer To Homelessness
Shadow housing minister says interest rate hike will also heighten risk.
Interesting reading from Shadow Housing Minister. You should be able to Google it to read the full extract.
Mohammed says
Hello,
I had applied for the smi loan in march 2018 and still have not heard back. My mortgage lender is sending me repossesion letters as there has been arrears which have not been paid from the shortfall of smi payments. What am i suppose to do ? Please advise
Sim says
Phone DWP first and explain you urgently need the SML payments from the date you applied.
Clare Denise Scott-Jones says
If you have a smi application in progress then repossession proceedings are not to be commenced whilst application is being processed. For Reference Take a Look at The *Pre Repossession Protocol Procedure*- that Has to be Adhered To By The Mortgage Lender.
Sim says
I was phoned yesterday by the DWP asking if I wished to apply for the SML loan. I said no as I have been paying the mortgage
interest since April 2017. A year before SMI was withdrawn April 2018.
Just another case like many other pensioners who rarely heard from the DWP and unless you pro-actively ensure DWP have
assessed you correctly you are likely to be struggling. The DWP know thousands of low income pensioners are not claiming
their full entitlement but don’t expect them to contact you to ensure you are ok, because you will have to do that. It saves the
DWP a lot of money. So don’t be complacent if you or someone you know has been left for years to rot! Age Concern and
Citizens advice will help even when “doing it online” is a foreign country!
I asked the lady who phoned if she was from SERCO and very offended she said “No this loan is a DWP loan”.
Left me wondering if DWP are further distancing themselves from SERCO and why that might be!
deni case says
I have yet to accept the loan as I’ve been so reluctant and managed to keep going but it looks like I will have to at some point. This might be a silly question but-What happens if I want to/have to rent my house out and go away for a few months? Do I automatically then lose the loan which is dependent on pension credit plus lose the pension credit? / Do I have to ask their permission? Not sure at all what happens here. Thanks.
Sim says
Rent and go away would be a change of circumstance and add income.
Likely to risk loosing your pension credit while away.
Hope to reinstate PC later if DWP agree and still qualify for SMI loan?
You might consider taking a lodger which is less likely to lose your PC
Sim says
PS The first £23 of lodger’s rent used to be disregarded by DWP so that amount would not loose your present Pension Credit.
Check with DWP as the disregarded amount may well be a lot higher nowadays.
Gareth Morgan says
You need to be cautious about this. There is a big difference between taking in a lodger or sub-tenant, when you are living in the house, and renting out the house when you are not living there.
Sim says
Spot on Gareth! Taking a lodger and still going away would not be wise! Should have made that clearer!
Sim says
Sorry £23 is wrong. The disregarded amount still remains at £20 where it seems to have been stuck for decades.
Means tested benefits – the first £20 each week in rent will not be counted as income. Provide some meals to your lodger, then only half of what they pay you each week over £20 will be counted as income.
Council benefits – Similar rules for what is counted as income may apply so check with your council !
Sim says
Gave online pension credit calculator dwp.gov.uk this simple test
man england born 10/10/1942 with 15000 outstanding mortgage, state pension 168/week, 4500 in bank account, 1 lodger pays £43/week
Result = you could get a pension credit of £11.40/week and SMI loan £7.53/week
to find out exactly phone Pension Credit claim line Telephone: 0800 99 1234
so would seem small lodger income did not remove pension credit entitlement.
easy to test this calculator out yourself or bite the bullett and phone ’em!
Catherine says
Hello everyone,Just wanted to point out that I accepted the loan offer thinking as I was led to believe it would continue to pay SMI at same rate,but Oooo Nooo….
June payment was £44.04 (as usual)
July payment £ 9.12
August “. £ 9.12
After lot of hassle getting to speak to someone,was told it’s because my capital repayment has dropped.
“ Really “ Oh yes I have managed to pay an extra £80 since June.But still don’t understand the big SMI drop.
So I have now got myself this paultry loan of £9.12 per month is it worth it ?
I am considering cancelling the loan, can you tell me how please ?
Sara (Debt Camel) says
Can you tell me how big your remaining mortgage is? How many years until it ends?
Sim says
The drop in interest only mortgage from monthly interest of 44.04 to 9.12 equates with your having paid extra amounts above the SMI to clear more than 3/4 of the outstanding capital since DWP last assessed the SMI.
That assessment may be from several years ago and 44.04 is way out of date. 9.12 would equate very roughly to £5000 outstanding on mortgage so if the outstanding capital is a lot more than that, ask DWP why 9.12.
If around £5000 is correct you are lucky and may well be able to manage without the SMI loan.
Catherine Wenbourne says
Yes it is just below £5000 with 2years left.
Sim says
Sounds like you’re very savvy and on track to zero by then!
Sharyn smith says
I am getting SMI…..currently being paid at the standard rate. I am switching my mortgage to a fixed 3 year rate at 2.29% I need to know if the SMI load will honour this.
Sara (Debt Camel) says
Is this new fix with the same lender or are you remortgaging with a different lender/
Sharyn smith says
Ty so much for your reply.
It’s with the same lender……
Sara (Debt Camel) says
The rate your SMI is paid at is 2.61% at the moment – you can check to see if it ever changes here: https://www.gov.uk/support-for-mortgage-interest/what-youll-get.
This is a fixed rate, it isn’t linked to the interest rate you are paying. As your SMI is being paid to the same lender (that was why I asked you if you had changed lenders) there shouldn’t be any need to tell the DPW that your mortgage rate has changed.
Sharyn smith says
Thank you so much for your reply.
That’s great to hear……
TONY TOWNSEND says
Dear Sara,
My recollection of the SMI rate paid, is that it is based on the average of fifteen High Street Lenders Mortgage Rates, – I was told by DWP back in 2010 to contact a department of The Bank of England to discover how the rate was set. As rates rise SMI should also eventually be increased.
Under Chancellor George Osborne SMI rate was reduced from 6.08% to 3.63% on 01/10/10.
Regards,
Tony T.
Tim phillips says
What happens if it is a joint morgage but ,we separated 10 years ago but however I can’t come off the morgage as I’m the only security on the house and I can’t force the sale of the house until the kids come out of full time education.
My ex has signed for this loan but I haven’t agreed or signed for this, so how will this work because surely it can’t effect my half of the equity?
Swill26 says
People on benefits with a mortgage are ALL prisoners as UNABLE to switch to cheaper rate and deals or switch mortgage providers. People who need it the most are being denied the cheaper rates and deals. How unfair and sad.
Please read more on article on moneysavingexpert.com below.
https://www.moneysavingexpert.com/news/2018/10/martin-lewis-mortgage-conservative-party-conference/
Swill26 says
Is that possible to switch rates or mortgage provider whilst on SMI?
Sara (Debt Camel) says
You should be able to remortgage with the same mortgage provider but it’s not likely any other lender would offer you a mortgage.
Swill26 says
Yes I did ask my existing lender several times, but they informed me that they are no longer offering any other products, just managing existing loans. I’ve been stuck paying the base rate for years, and now increased rate.
Could any mortgage specialist/brokers offer help being on SMI?
Sara (Debt Camel) says
I would say that is extremely unlikely
Sim says
In the opening explanation, you say of SMI “In June 2017 it was reduced to only 2.61%.”
Checking this government link
https://www.gov.uk/support-for-mortgage-interest/what-youll-get
It seems to still be 2.61% despite the quarter percent hike by the Bank of England.
It means most of those who opted for the SMI loan, now face a small shortfall they
must pay separately themselves to avoid going into arrears.
Even the modest Nationwide variable mortgage at 2.75% will not be fully covered!
The SMI loan scheme is not doing what it says on the tin and this will worsen if
hikes in bank rates continue to be ignored!
Sara (Debt Camel) says
The rate at which SMI s payable is set in relation to the average interest rate on new mortgages. It only changes when the average rate moves by more than 0.5%.
These rules have not changed when SMI was switched to a loan.
Laurel Ellis says
Dont understand the latest post on the subject of SMI.
Pension Credit is not affected by housing costs? If you dontt ake up the loan, you no linger get anything towards your mortgage interest but it doesnt affect your pension credit amount?
Sara (Debt Camel) says
Hi Laurel,
do you have a benefit / SMI problem? If you don’t I would suggest not worrying about what some other people have posted as their situations may not be the same as yours.
Neil Alborn says
Got my first annual statement from the SMI loan and it’s £2013.05 I dread to think wot it will be in 21years time when my mortgage is finished.
The interest is £2.14 but will go up considerably as my loan gets bigger.
All these years I’ve tried to keep myself debt free other than the mortgage and now I see this spiraling out of control.
From being a carpenter for 14years who paid my mortgage with ease and hoping to leave my house some day to my kids to being disabled not able to work with these debts stacking up and what equity I had in the house will be swallowed up. 😪
deni case says
Is that interest on top of the bank interest or inclusive? What is the bank rate that you are paying pm? I am dreading having to apply very very soon as my fixed rate runs out in July and I will have to renew or go onto the bank’s SV rate which will be much higher.
S William says
I feel the same pain, it’s very unfair to be put in this compromising situation.
I wish changes to make a benefit into SMI loan are reversed back soon as it unfairly targeted vulnerable people.
Annie says
I took out smi loan last May received letter from council tax benefit dept Feb 2019 inform me now on contribution based esa (support group) then
received letter from Dwp inform me was going on contribution based from April 2019 rang they informed me due to taking out smi loan previous year (2018) I was now on contribution based and together with my part time occupational pension (received early due to accident not eligible to oap pension until 2023) I now have a bigger amount of esa money than my pension so do not qualify for income related esa am at a loss why taking out smi loan resulted being moved to contribution base. I have been entitled to income related 10pence a week for number of years (before was moved from incapacity benefit to esa) this entitled me to council tax, dental and optician. They took housing benefit off my esa previous to moving to smi and paid it direct tomortgage company leaving me with £77 a week so they never really gave me anything other than the 10 pence which as previously said resulted in me not paying council tax etc. I spoke to dwp and council tax benefit to explain I still have a top up of 10p showing on the letter which gives breakdown of my benefit both say I am on contribution based not entitled to anything else, the council have now issued me with a bill for council tax 2018 – 2019 asked why did not contact me sooner answer was that they do not review benefits until February and they were not informed by dwp before.
Sara (Debt Camel) says
Hi Annie, I suggest you go to your local citizens Advice and they will try to resolve this for you.
Annie says
Thanks Sarah for your advise I’m sure there must be lots of people who live on their own in same situation as me
TONY TOWNSEND says
Dear Sarah,
Is Annie’s Council treating SMI Loan as Income?
I know there is a no earnings rule – if you earn a penny SMI Loan is withdrawn…
Sara (Debt Camel) says
that can’t be the problem – the SMI hasn’t been withdrawn. and the problem sounds to be with the DWP not her council.
Neil says
Does anybody know what other political parties have said about the SMI LOAN and if it likely to be reversed if they were to get in, just wandering as there might be another general election.
Laurel says
I am an active memeber of our local Labour Party and I myself am affected by the withdrawal of SMI. I have not taken the loan, so struggle to meet my morgage payments each month from the very meagre state pension plus Pension Credit. I know that Labour policy is to scrap Universal Credit, but alongside this the present government qnd the coalition government put through many changes to welfare benefits under the radar. I am going to find out.
Anna says
O am in the same position as your good self. I tried to take the loan, sent it all back by registered post, which they denied receiving, so having to pay it myself. My outgoings are more than my incomings. Also just learnt that when my child comes back from Uni the Severe Disability Premium will be stopped too. I don’t know how to survive. All my bills are the usual unavoidable so nothing I can cut back on. No great big debts from shoe-shopping. I always shop around for cheapest utilities etc. Just read five million has been given to criminals in legal aid. Disabled and pensioners being targeted left right and centre.
Sara (Debt Camel) says
I suggest you go to your local Citizens Advice and get advice on all your benefit options.
Anna says
Thank you. I will definitely do that. Government is gradually cutting more and more off for disabled and pensioners. Barely advertised and comparatively affects so few. Am expecting a PIP cut too when next reviewed. Signed a 38degree petition against LMI but not sure where that is at now.
Sara (Debt Camel) says
honestly petitions rarely do much good. Tell your MP how unfair the system is – that stands more chance in the long run of making a difference. You can find your MP here https://www.parliament.uk/mps-lords-and-offices/mps/ and email them.
deni says
Thank you, Laurel. I eventually had to take out the loan but I truly resent paying that interest on top of the bank’s. Trouble is, a political party may promise much and not follow through as we know only too well. Still, interesting to hear what you find out.
Lesley says
Hi I have accepted the new smi loan but after several weeks or no contact from dwp I called up and was told that I need to send the dwp mortgage statements from April 2018 to present date to show there is no arrears but there is now arrears as dwp have been so slow to credit our account with the loan my MP is even baffled by it why do they require statements regards L
Sara (Debt Camel) says
I have no idea, no one else has mentioned this.
Can I suggest you do send the statements and you go to your local Citizens Advice for help to put in a complaint.
Lesley says
I have requested them and will send them , my MP is dealing with it also and she has no idea why my statements are required the last complaint I put into the dwp only got picked up 8 months after I complained the problem is so many dwp advisers are not fully trained to be compliant or to even know anything about how SMI now works
Swill says
Sadly it really seems like the government is preying on the most vulnerable people in society.
Anna says
Would appreciate any help to following questions. I want to take out a SMI after 9 months of UC payments I can now be reviewed per my request. I have arrears on my.mortgage with a total repayment due in 8 years of 310,000. If I am approved what could I expect to see as help in terms of monthly support and is that figure what my mortgage company.has to accept as a clearly while out of work I cant top it up from elsewhere? Is the SMI always paid direct to the lender? Many thanks for any help
Sara (Debt Camel) says
is the mortgage repayment or interest only?
SMI is always paid to the lender, not to you.
is that figure what my mortgage company has to accept as a clearly while out of work I cant top it up from elsewhere?
No. but getting this may mean your mortgage company is more prepared to help. See https://debtcamel.co.uk/payment-breaks-end-pay-mortgage/ for some info on what help can be possible.
Can you say something about the rest of your situation? How likely are you to find another job soon? Are you behind with other bills? Do you have other debts too?
Anna Douglas says
Thank you for your reply. My mortgage is an interest only payment one. I am in the hospitality business self employed so it wont be for a while before i see anything and i dont qualify for anything other than UC . I have friends helping me but what i really want is at least £500 towards my mortgage payments out of the SMI as i believe the lender will accept that (would what they cover up to cover that?).
Sara (Debt Camel) says
SMI should help you with the interest costs of 200,000 of your mortgage. It will be paid at 2.61% though, not the interest rate you are charged on your mortgage. What interest rate are you currently paying?
Anna Douglas says
Am paying interest at i think 7% as i am with Kensington Mortgages. So my payments are £1080 a month normally. If i can get at least 500 a month from them that would be great as my.mortgage company would probably accept that
Sara (Debt Camel) says
7%, are you sure? That’s horrendous. Was their interest rate always that high?
As you will only get help with 200k of the mortgage and it will only be paid at 2.6§ that will come to less than £300 a month.
How much equity is there in the house?
Do you have other debts as well?
Sara (Debt Camel) says
I don’t think the 7% can be right, can you look it up?
Anna Douglas says
Yes will call them to recheck today but it is horribly high as they do ‘high risk’ mortgages which at the time as i was a freelancer in film business was the only morgage i could get. My equity is 400k in flat currently. Much appreciate your help
Anna Douglas says
Just checked its infact 4.68% am paying re /interest! Does that mean i could see at least 400 pounds help a month?
Sara (Debt Camel) says
that looks much more likely :)
At a rough estimate you would get £388 from SMI… thats £1080 times (200/310) times (2.61/4.68), so correcting for only being paid on a mortgage of 200k and at a rate of 2.61%
Petula says
Hi Sarah,
Thank you for your updated information. I noticed you have amended the standard rate used to 2.65%, do you have any idea how this was calculated and do you think the rate will go up anymore? I’ve searched and searched the internet, contacted SMI loan department and the DWP and asked my mortgage provider. Previously they stated that the rate would be adjusted once the average mortgage interest rate went up by 0.5%, which happened months ago.
I’m desperate to find out as my mortgage company have put so much pressure on me the last 18 months even though I am classed as a vulnerable adult with both mental and physical disabilities. My monthly mortgage payments have gone from £350 to £1090 and my SMI amount is now £285 monthly.
Sara (Debt Camel) says
who is your mortgage lender? Do you have mortgage arrears?
Petula says
My lender is Wave, they’re owned by Bank of America. I’m stuck on their variable rate and yes I have arrears of £3,638 as at 31st May 2023. I bought my house 21 years ago and they will only let me have an SMI loan based on my mortgage taken at that time plus a small amount for home improvements. Hence £137,500 rather than £200,000. I really don’t know why as it’s been a loan for years!
Sara (Debt Camel) says
I think you need to talk to a debt adviser about your options urgently. Go to your local Citizens Advice or phone National Debtline on 0808 808 4000.
To answer your question, the rate is likely to increase again at some point, but this may be very slow as although all new mortgages are at over 2.65%, it won’t increase until the average rate has gne up 0.5%, so that is still taking account of the many mortgages on long fixes at a cheap rate.
Petula says
Thank you Sarah, I’m afraid even the debt advisers are unable to help, I have recently been corresponding with Stepchange, I’ve even tried selling. My daughter had a brain tumour removed Friday which I have advised my lender about and they seem to be offering more support, I am waiting for a response from them.
Could you please tell me where I can find the average rate? I thought I had found it but it didn’t take into account the longer term fixes. I very much appreciate your help.
Sara (Debt Camel) says
I’m afraid it is published deep somewhere in some Bank of England statistics. And even when the 0.5% is crossed, it still seems to take them months to up the number. Totally unsatisfactory.
Do you have any other debts apart from the mortgage arrears?
Elsie says
@Petula, the SMI being based on the original sum is so unfair. Even remortgages are excluded – I’m in that group. In a world where people are expected to remortgage regularly it’s an utterly crazy rule.
Talk to National Debtline and PayPlan as well as Stepchange. PayPlan knows about the Norgan Agreement (Cheltenham & Gloucester vs Norgan). The Norgan Agreement means that providing you can meet your full mortgage subscription, you can pay off your arrears in the remaining term of your mortgage, so if you have say 60 months remaining you would pay £3,638 divided by 60 = £60.63 per month. Also Shelter can be really helpful.
Also check out the FCA MCOB rules, guidance on forbearance and the FCA June 2022 Dear CEO letter so that you are informed when
You don’t say, but if you are trapped paying the SVR and unable to switch, also check out the UK Mortgage Prisoners Group.
Nala says
I want to proceed with getting a life time mortgage but I cannot because I claim SMI and they have put a charge on my house. They have said that will only be removed if I pay the total owed which is £12,600. I am not in a position to pay this large amount and as a result the mortgage no mortgage company will proceed with the mortgage initially offered.
I am very worried as my mortgage term is nearly expired and I cannot pay the outstanding balance.
How can I get this charge removed so that I can proceed with a Lifetime Mortgage.
Sara (Debt Camel) says
Are you planning to get a lifetime mortgage that is the same size as your current one?
Cherry says
Hello We have just bought a home , haven’t even made the 1st mortgage payment yet but we claim universal credit ( kids, child disability amd carer element) we were getting housing paid before we bought. Now they offering us to apply for smi loan. If we take it just to save money in the here and now, and we die and leave the home to our children, do they have to pay it back straight or not until or if they sell it? Also does it affect getting remortgage deals ?
Sara (Debt Camel) says
Can I ask who your lender is? Is this a right to buy? Or any form of shared ownership? What mortgage rate are you paying?
When you say remortgage, do you just mean getting a new fix, or borrowing more/changing lenders/moving?
Elsie says
Even if you leave the property to your kids, if it is over a certain threshold, your children will need to apply for probate. Presumably, as a creditor, the SMI would need to be settled at probate along with inheritance taxes before the children can take over the property. If you remortgage, you only receive SMI for the original sum, unless you undertook very specific home repairs that the DWP considers allowable, Keep every single receipt.
Sara (Debt Camel) says
Regardless of probate and inheritance tax, SMI became repayable when a property is transferred or sold. And the mortgage would have to be settled as well.
J. Henry says
I am absolutely disgusted that it is not made clear that by accepting this loan a charge is placed on your home and if you want to change mortgage providers, you are not able to do so unless you pay the entire loan off in full.
If you have therefore been in receipt of this loan since 2019 it accumulates to well over £13,000. No mortgage provider will proceed with your application until this charge is removed!!!
Also if you stay with your mortgage provider and want to pay off the loan in instalments they charge you £30 a month interest!!!
This has caused me so much stress and I feel like I am being penalised for having a property. I am beyond disgusted.
Sara (Debt Camel) says
It absolutely is made clear that a charge is placed on your house. The DWP can’t advise on what mortgage lenders are prepared to lend on.
People thinking of applying for SMI have to consider if they have other practical alternatives.
deniz case says
It’s a land and property grab and nothing more. Also it carries compound interest which makes the whole thing even worse.
Sara (Debt Camel) says
I don’t like SMI. But the questions for someone who is entitled to it is whether they can manage without and whether they have any better options.
Sharon says
I thought they made everything totally clear when the benefit was converted to a loan. It was clear that there would be a charge on my property, and it was clear that there would be compound interest. I did a calculation over 10 years to see what I was likely to end up owing them at the end of that period (which was when my mortgage was ending at the time of taking it out), so I knew what to expect. I don’t particularly like SMI either, of course I wish it had remained a benefit! But I could also see why that wasn’t really fair or tenable anymore. If I hadn’t taken it I would’ve lost my home, so there was no choice. And there has to be a price to pay for that, nothing comes for nothing (not anymore anyway!).
Sheila says
I refused an SMI loan thank goodness and feel sorry for the people who had to take out an SMI loan and cannot sell their property,
Sara (Debt Camel) says
An SMI loan does not stop you selling your property.
Sheila says
If you owe money to SMI you cannot sell your property until you have paid the loan back
Sara (Debt Camel) says
yes you can, the SMI charge gets settled as a part of the property completion. This does not have to be done before the property is sold.
Sharon says
You can still sell your property as long as the sale price leaves enough to pay off the SMI loan.
Sara (Debt Camel) says
if there isn’t enough left to clear the SMI loan, the rest is written off by the government. See https://www.gov.uk/support-for-mortgage-interest/repaying-your-loan
Sharon says
Oh yes that’s right if you have not enough equity to pay off the loan they write it off. I wonder if the were offering those loans to people who were either level or in negative equity at the time?
Sara (Debt Camel) says
There is no credit or equity check on SMI
Jay says
I wanted to move to an Equity Release mortgage and was informed that I could not do so until I had paid the loan in full!
Sara (Debt Camel) says
Were you planning to clear the SMI loan with the equity release?
Laurrn says
Does anyone know if smi will be increased as my mortgage is going from 2 % to 5.99% in October xx
Sara (Debt Camel) says
unfortunately it won’t be – the amount you are paid is linked to average mortgage amount paid – which is going up but very slowly…
who is your lender? is 5.99% the Standard Variable Rate? do you have mortgage arrears?
What about other debts – are you making payments to any?
Lauren says
Hi no it’s their best fixed rate for 2 years , so looking at another £350 a month, not an option to go to other lender as on dmp x
Sara (Debt Camel) says
how much are you paying to your DMP at the moment? How large are the debts in your DMP and how long has it been going on?
Lauren says
Hi £100 a month for 9 months , total debts £15000.
No mortgage arrears x
Sara (Debt Camel) says
OK, so ask your DMP firm (is it StepChange) if you can reduce the payments to a token £1 a month from October as your mortgage is going up such a lot. You can also switch to interest only for 6 months, but that won’t be long enough for you… I think you need to talk to your mortgage lender about options to reduce your payments/ Who is your lender?
In addition, I think you should look at affordability complaints against the debts in your DMP. Can you list them here? Also against any other expensive debts that you had in the couple of years before your DMP. Winning these will get the balance reduced, and if you win any against settled debts, you would get some cash refunded.
Lauren says
It’s with PayPlan. One debt with mbna, the other with Tesco , both credit cards. I ended up not being able to pay the monthly amount back end of last year after my partner left me with 4 kids.
What is an affordability complaint. ? X
Also have put house on market but not having much luck
lender is nationwide , all they can do is offer the 6 months interest only , but that only saves me for 6 months , I doubt rates will come down by that much by Spring 2024 x
Sara (Debt Camel) says
ok so ask Paypal to cut your payments to a token £1 a month u til the house sells.
Have you told Nationwide you are trying to sell the house? You can ask for the mortgage to be switched to interest only until it sells. Let me know if they refuse to do this. But you can also ask for a lower interest rate for a a temporary period as you are trying to sell the house and can show the october increase is unaffordable even if you drop your DMP payments.
An affordability complaint is saying that a lender did not make adequate checks that credit was affordable for you. For credit cards, this typically means that they increased your credit limit too high – see https://debtcamel.co.uk/refunds-catalogue-credit-card/. If you win one your balance will be reduced as you will get a refund of some interest charged,
Lauren says
hi sara
im wondering if you or anyone on here can offer me advise, i applied for support for mortgage interest end of june, my mortgage company confirmed at the beggining of august they had returned all paperwork back to dwp. since then i have had no update as to what is happening, i have phoned several times to be told a case manager will contact me and everytime no one ever does. i have now escalated it to a complaint with universal credit and still no one has contacted me, im so stressed as i have been trying to get this help for over 3 months. It is impossible to speak with a case manager and these are the only people who can process my application, is it normal to take this long? x
Sara (Debt Camel) says
That does seem a long while but I don’t have the experience to say how long it usually takes. I think you should go to your local Citizens Advice and ask for their help with this. They can also see if there is any extra help you may be entitled to.
Elsie says
It can take a long while to come through – in 2019 – 9 months. Phone the benefit office for a timeframe. Your lender knows you have applied, so they’ll be okay about waiting. They cannot evict you whilst waiting.
The amount of SMI you will receive could vary and is interest only. Calculate the expected difference now and pay this to avoid a growing arrears debt. SMI is 2.65% and your interest rate is 8.13%, you will need to make up the 5.48% difference. If you remortgaged, you will only receive payment to cover the interest for the original mortgage amount.
Ask your lender about whether they recognise the 13th payment because SMI is paid every 4 weeks. Many lenders will only accept 12 payments – 1 per calendar month. If a lender doesn’t recognise the 13th payment, you could always be a little in arrears…and charged a bigger monthly late payment fee.
Also check out the Mortgage Charter on the FCA website in case any options are suitable for you. Use the Norgan agreement if you have arrears to enter into a payment plan.
If your mental health is suffering and you have arrears, you can apply for the Breathing Space scheme. There are two options, a short term one, or if you are under CMHT or a psychiatrist, you can stop any debt collection activity until after your treatment has ended.