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 autumn 2024 this is 3.66%. If you are paying a higher interest rate, you will 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 government adds interest to this loan. This is charged at the OBR’s forecast of the gilt rate – the rate the government can borrow money at. In autumn 2024 this was 3.9%.
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
Nick Pearson says
Funnily enough this is very similar to a proposal myself and a friend from Shelter put forward during the reposession crisis of 1991. The difference was we suggested that the loan should be for the actual mortgage payments as well as the actual payments due to any secured loans. It is difficult to justify why the taxpayer should assist a homeowner to purchase a property which is likely to be a often rapidly appreciating asset, unlike a property that is rented. The analysis at the time was that a large percentage of people on SMI had been for over 2 years and had substancial equity. I have no idea if this is still the case.
Sara (Debt Camel) says
Most of the people getting SMI as they are on Pension Credit are likely to have significant equity. For working age, it largely depends on how long ago the house was bought.
The changes are complicated and people are likely to find them stressful, but they aren’t nearly as much of a problem as the current rate SMI is paid at or the 39 week delay IMO.
Ann stockton says
So it is ok for governments to pay landlords rent which covers landlords mortgage
So we will sell up and move over to the rental sector because we have no equity in our property and our final mortgage is up in 3 years
Our payment on interest only is less than 50 per week so we will rent at 125 per week ,this will cost the government more ?
There is no reel sense or fairness in this change
This is going to make people homeless in the future
I WILL BE VOTING FOR ANYONE BUT CONSERVATIVE IN THE FUTURE
denise case says
Agreed. Appalling! Have you signed the petition? http://you.38degrees.org.uk/petitions/stop-changes-to-support-for-mortgage-interest-smi
What else can we do?
patricia dunne says
Thank you very much Denise, for mentioned the petition, I hope that everyone that can will drum up support for it via face book, twitter etc.
I am prepared to fight to get this over turned and all support is greatly appreciated. Regards Patricia Dunne.
B Caffrey says
hello Patricia
I have just emailed 38 degrees for a second time, in the hope that they just might adopt this cause as one of their own, and not just a barely publicised private petition. Like you, I live in hope.
I can only suggest that others on here do precisely the same … I guess the more logical arguments they get, the less time to when they relent, and join our just cause.
Kindest Regards … Brian Caffrey in Dorset
SMI is already unfair says
Our SMI payment is £240 pm and a private one bed flat to rent is £675 min. If we sell, we’ve made ourselves deliberately homeless, but there’s not much equity in our place, so very quickly we’d need to claim housing benefit. For repossessions, the social housing sector will be under even more pressure as many of those receiving benefits will be eligible for social housing.
Our mortgage company refused a council grant/property charge that did not need to be repaid because we have arrears (built up waiting for SMI). Mortgage companies refuse under the Mortgage Credit Directive.
We switched to a joint mortgage when I moved in many years ago, but SMI payments are only calculated on the sum outstanding on my partner’s original mortgage settlement. If we’d moved and bought a new house, the whole of the new mortgage would be covered. We have £000s to find each month on an interest only mortgage. Our mortgage company also insists on us making up the difference caused by 4 weekly, not monthly, SMI payments. A landlord would receive housing benefit to cover the full repayment mortgage, plus maintenance and profit.
Mortgage companies should forced to reduce interest rates to the lowest available. Our mortgage is based on a 1% loan note, but we pay way more. Finally, why are mortgages variable at all? The US offers fixed repayments throughout the life of the mortgage.
Xenia Huntley says
You have summarised the idiocy of stopping SMI so well. It’s a housing allowance, whether it’s paid to landlord (for their mortgage or mortgagee make zero difference) housr prices don’t always ju at go up! It’s just helping people with a loving cost who truly can’t afford to survive. So frustrating
Bob says
Dear all
I have serious mental and physical disability’s, I have an interest only motgage and negative equity. I have lived in my house for 10 years and been on benifits for 2. Years after using all of my savings currrently get about a third of my interest paid. Because I am on benifits and the DWP pay my mortgage company every four weeks. I am always in arrears as YBS want to be paid every month I can’t do anything about this and the mortgage company Yorkshire Building society
fine me £60 a month for late payment.
They have already put my mortgage up twice in the last two years and I am now paying 5.5% if they bring in the new deal I will lose my house so instead of paying £300 a month my family will have to move into a private rented accommodation which means it will cost the government £400 a month more than they are paying now. Go figure how fair this is not only did my two children lose there mother in the car accident that was an uninsured driver, they are now going to lose there home as well.
Thankyou for your compassion Mrs May.
denise case says
I am so sorry this has happened to you, to all of us badly disadvantaged in our own way or we wouldn’t be in receipt of the bloody benefit in the first place! I have been doing my best to promote an online petition on social media that one lady on here started, but it needs a lot more people involved. so far only 98 have signed. I guess it’s one of those situations where most people think if it doesn’t directly affect them, they won’t get involved/couldn’t care less/I’m alright Jack! Pensioners on the poverty line and the sick/disabled don’t count for much, it seems! We really need more people to sign and make a fuss though ultimately I doubt it will make a difference. I’m putting the link below, just in case you haven’t seen it and want to sign and/or tell people about it.
https://you.38degrees.org.uk/petitions/stop-changes-to-support-for-mortgage-interest-smi?source=facebook-share-button&time=1507797692
Gareth Morgan says
It sounds like you’re in a pretty bad situation and I’m sorry about that. The only thing I can say about the loan is that if, as you say, you are already in negative equity then you wouldn’t have to repay the loan as it would be written off.
Sara (Debt Camel) says
I think a £60 a month fine for late payment is outrageous. I don’t care if this charge is stated in their T&Cs, it is unfair that this should be levied every month when they can see you are NOT getting deeper into arrears and the timing of the payments is not under your control
I suggest you put in a written complaint to them at customerrelations@ybs.co.uk. Put COMPLAINT in the title. ASk for them to stop adding this charge and to refund you the amounts already added. If they refuse, put in a complaint to the Financial Ombudsman.
This won’t make a huge difference to your situation but it’s worth doing!
SMI turning into a loan actually makes little difference to you, your problem is that SMI isn’t close to covering your interest payments. I am sorry but I think you should seriously consider switching to renting. It could make a lot of difference to the money you and the kids have to live on. I think you should go to your local Citizens Advice and ask if they can help you compare how well off you would be in the two different situations.
Judy Kennedy says
Nick Pearson says
‘It is difficult to justify why the taxpayer should assist a homeowner to purchase a property which is likely to be a often rapidly appreciating asset, unlike a property that is rented.’ I am on ESA supprt and receive £80 pcm on a mortgage of £360. I receive £105, you do the maths. The taxpayer is not assisting me to buy my property I have to find £285 to pay the capital on my mortgage or I am on the street. If I could not borrow the money from my sister I would kill myself. What about people who don’t have family that can help them, what about that Nick?
Housing Benefit cost some £9.6 billion, most of it going to private landlords for extortionate rents and in some cases sub standard housing. It’s alright to pay a private landlord his mortgage and then some. It’s alright for the taxpayer to pay the mortgage of in some cases a multi millionaire landlord, but not someone living on £105 per week. I don’t expect anything, I feel helpless and often ashamed of where I am in life. I had botched surgery. I just don’t want to keep getting kicked whist I am down.
Anon says
So you clearly don’t grasp how it works Nick if you think “It is difficult to justify why the taxpayer should assist a homeowner to purchase a property”. The current benefit is for help with mortgage INTEREST not mortgage capital repayments. Just paying the interest is NOT assisting anyone to purchase their property. Worse still Serco informed me that the interest rate is currently 1.74% PER MONTH and COMPOUNDED, which works out at 23% APR !!! They may as well tell people to pay their mortgage interest on their Credit Card! So if you’ve been made Diasabled in an accident and have no prospect of getting back to work or off SMI benefit, this is a financial scandal and a disaster for people who desperately need help (instead of yet another kick in the teeth)
Sara (Debt Camel) says
You have misunderstood the interest rate – the rate is 1.74% per annum not per month, but it is calculated monthly.
Naomi Porter says
I think it’s appalling that people who have never used the system for housing benefit as millions have for years on end, have to take SMI as a loan. These people have mostly always worked and paid more money in to the system. Only a conservative government would do this. I can’t believe that Shelter made a similar proposal and I won’t be supporting them any more. I’ll do my own thing to support homeless people. Many people who were conned into voting conservative will suffer and it will add to the number of repossessions because that is exactly what the conservatives want. They believe they own everything and can do what they want with everything and everybody. They want it all back, they want total control, they are vicious thugs. It is the straw that will break the camels back -hopefully. Maybe some of the people that voted conservative the last time we had elections will wake up to this nightmare and look at what it going on with open eyes before more policies that damage home owners are proposed. Shame on Shelter too. Those that are lucky enough to have homes want homes for those that haven’t, this policy is just robbing Peter to pay Paul. It does nothing effective and it will only allow the conservatives to spin the figures if they can manage to do that efficiently. More lies and rubbish.
Sara (Debt Camel) says
Shelter’s view is explained here https://blog.shelter.org.uk/2015/07/changes-to-support-for-mortgage-interest-mark-fundamental-shift-in-welfare-provision/.
Sheila says
I will not be voting for the Conservatives again.
shane brown says
I am in the same position, now i have a physical disability and new stress anxiety and depression to deal will too now. what a disgrace.
The thought of being homeless makes me feel physically sick.
Gareth Morgan says
There is one improvement in the new proposals’, the 104 week limit for JSA goes. As for the rest, I’ve been doing some modelling about the effects on equity. It does depend on some factors that are difficult to forecast, like gilt rates and HPI, but for some long term claims there may well be an advantage in taking out a commercial Equity Release scheme.
Sara (Debt Camel) says
I did note that improvement but decided it was hardly worth mentioning as there is no 2 year limit in UC, is there? So JSA limit is becoming obsolete with the UC roll out.
Commercial Equity Release for someone on Pension Credit? That will be interesting. Another category of clients arrive at CAB that we aren’t allowed to give advice to…
Richard Saunders says
Will the loan cover the mortgage interest in full or only part of it, like the current SMI, which is based on Bank of England average mortgage rate (2.61% from June 2017)?
Sara (Debt Camel) says
If your current SMI is only covering part of the interest, this new loan will do the same :(
Steve Burns says
Will there still be a 39 week wait before the loan is available?
Sara (Debt Camel) says
So far as I know, nothing is changing apart from the fact that a benefit is being paid as a loan.
S Davies says
Unfortunately the interest is compound.
Sara (Debt Camel) says
The SMI interest? Yes. But it is at a VERY low rate. Unless you can get the money for free from family, this is probably still a good option for you.
Laurel says
I am on Pension Credit and have a shared ownership property as I came late to the housing market – and I received a letter from the DWP last week informing me my aupport for mortgage interest would end in 2018. My mortgage runs for another 12 years so I doubt that there will be any equity left as I will already have paid interest to the mortgage company and also interest to the DWP. I am concerned now about how I will be able to pay off the mortgage as most of the equity will fo to the DWP, and I will be homeless. Any advice?
Sara (Debt Camel) says
Is your mortgage interest only?
Laurel says
Yes, with having to pay rent as well I couldnt afford a repayment mortgage.
Laurel says
Sarah, I have been in touch with my shared ownership company Devon and Cornwall Housing Association. They knew nothing about this change, nor did my building society. Devon and Cornwall Housing Association have said that it is not possible on a shared ownership property to take out a loan against the property. Those are rules laid down by the government who regulate housing associations.
Sara (Debt Camel) says
Hi Laurel,
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 the link at the top of this page) 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.
Gareth Morgan says
The regulations say that only the legal owners within the ‘benefits unit’ (the claimants and family) have to agree to the equitable charge.
Lisa says
My question is that my Mother who is 81 years old and has COPD gets this benefit on her Pension Credit. She has a joint mortgage with my Brother who gets this benefit as well. Therefore they would need two loans, one each. However, it states that the loan needs to be repaid when someone dies, would this still stand in this situation if my Mother died, as the likelihood would be that some mortgage would still be outstanding as neither of them have any life cover to repay the loan on death?
Sara (Debt Camel) says
That is an interesting question. Mother / son is probably fairly rare but a couple with a joint mortgage wouldn’t be. My guess is that it will be repayable on the second death, not the first, but I am afraid they are going to need to ask about this. Could you come back with the answer?
Margaret Miller says
I was told by Serco the loan would have to be paid either when the mortgage finishes or when the house is sole, whichever comes first
Margaret Miller says
I had the telephone call from Serco and was told that the loan had an interest of 2.2% which is variable. I have an interest-only mortgage which ends in April 2019. Imwas also told that when my mortgage ends I will have to pay the loan off. I’m a pensioner, my mortgage payment is £35 month, a small amount but enormous to me. How come the information received is different from information given above
My endowment should cover my mortgage when it ends. I only took out £18.000 and been chipping away to get it down to £16.000. Any shortfall will be paid by my son.
——————————————————————————-
EDITED the 2.2% interest rate quoted is incorrect – it should have been 1.7%
Sara (Debt Camel) says
Do you know how much the endowment is worth if you cashed it in now? How much are you paying a month to the endowment? How much help from SMI are you getting at the moment? Are you having to make any payments to the mortgage at the moment?
Margaret Miller says
I’ve only got a year to go with endowment and it’s £35 month – my mortgage is interest only and I only pay £33 month to mortgage company. I know all the figures and know if I see the endowment to the end I’ll get my bonuses. I’m seeing my son tomorrow, I’m hoping he’ll help me out, I knew my mortgage would finish at 71, just didn’t expect to have to pay loan back after mortgage had finished, it’s like not finishing it for another year or so
Sara (Debt Camel) says
You do need to find the value of the endowment now – if it is large enough to repay the mortgage, then you wouldn’t need this extra loan. When you get the figures, you could go to your local Citizens Advice and ask for their help? Or this forum could be a good place to discuss the figures and your options: http://forums.moneysavingexpert.com/forumdisplay.php?f=15.
But the extra loan will be small, so hopefully, your son will be able to help you with that?
Maggie Miller says
Thank you Sara, I’ll speak to him today, hopefully he’ll help. It’s pensioners with a big loan left I feel sorry for. It was such a shock to get the letter from DWP, I’d no idea this was going to happen.
Sara (Debt Camel) says
I know, there are going to be 10s of thousands of pensioners getting this letter and most of them are going to be really worried :(
Wendy Grosse says
Hi
My dad is currently receiving help with the interest on a small equity release mortgage on his property. However with these changes coming in I’m thinking should he take out this other loan option? His concern is that the original lump sum is to be repaid once he is no longer here and if he took this loan this would need to be repaid too. He has some savings and he is fortunate that he manages OK on his pension etc so possibly with our help could just pay the interest on the original mortgage. Not saying of course that that is ideal but thinking this just looks like he will have 2 loans instead of one. I haven’t read all the small print yet as he has only mentioned it today, but am I correct? Thank you
Sara (Debt Camel) says
If he is currently getting SMI his choice is either to take this new loan or find some other way to pay the mortgage.
I think you should help him look at the options. My guess is the equity release product will be charging higher interest rates than the new SMI loan, so it may be better for any savings from him to reduce that? Or any help from you? If it is his savings, obviously you want to make sure he really does have enough money, some older people can just cut back and cut back, ending up with a very restrive life and their family don’t realise…
Gareth Morgan says
Is he, or the lender, actually getting interest paid on an Equity Release loan? He won’t be paying interest himself so is this providing extra spending money or is it offsetting the Equity Release interest accumulating? It’s not usual for DWP to accept that these loans qualify.
sarah says
I received my letter yesterday and was totally shocked. I am a pensioner now and have been unable to find a job even though I’m qualified and have lots of experience. I didn’t apply for SMI for a long time as I kept expecting to find work and when it became apparent I wouldn’t find a job and I’d used up all my savings, I applied for SMI 3 years ago. With that help I still have to pay £340 per month on a state pension. Its a struggle and I have not heated even one room of my house for 4 winters now as I can’t afford to. I buy food on the sell by date to get it cheaper and still I struggle. There is nothing I can cut back on and there is no hope of finding a job as I’ve tried now for several years. I hate the thought of taking out a charge on my house with the loan. It seems like madness. I am worried beyond description. What annoys me too is most home owners have worked and paid into the system and those on SMI didn’t choose to lose their jobs. But the vast sums paid out for housing benefits for many that have never contributed to the system is not being stopped. I know people who live rent free on that benefit and then get to spend their other benefits on decent food, heating, and anything else they might need. I really don’t know what to do.
denise case says
This is nothing more than a property grab by a very greedy government lacking in any form of compassion! It basically means that a second debt is placed on the first and two lots of interest! The only winners are the banks and the government. I am appalled beyond belief and extremely worried. I’m a pensioner with an interest only mortgage which has until June 2019 to run at its current fixed rate. I have more equity in the house than the bank does. I can’t downsize as I could hardly go any smaller, I have no endowment or savings or private pension and family help is dubious. It’s unbelievable that the government would do this to people who have little or no earning power, without any nod to their circumstances. It’s barbaric! Serco shares meanwhile are on the up!! I have not been answering their calls as I don’t know what to tell them except a few choice words I would not be able to hold back! They have actually been phoning so often it’s tantamount to harassment as far as I’m concerned! What to do? Is there no petition anywhere to sign? I have contacted Martin Lewis Money Saving Expert, but to no avail. What to do?
Sara (Debt Camel) says
The SMI problem is going to be pretty minor compared to your real issue which is what are you going to do when your interest-only mortgage ends in less than two years? Do you have a plan? See https://debtcamel.co.uk/interest-only-mortgage/
Sheila says
I wish the newspapers could get hold of all the comments on this page and publish them, I would like to see this Government put to shame.
Deni says
I wonder if there is any way this can be achieved. I find it very odd indeed that only the Mirror has seen fit to comment, as far as I’m aware. Maybe it’s because in the grand scheme of things so few people are involved and most of them are pensioners on pension credit-the least newsworthy section of society. Even Martin Lewis doesn’t want to know, it seems! It’s disgusting!
Sheila says
I think you should have contacted Paul Lewis – Money Box and not Martin Lewis. Paul Lewis has a website and you can contact him by email.
Simon says
There is a petition on the 38degree website I believe. You’d need everybody affected to sign it but the Tories know there aren’t enough of us. They’ve deliberately picked on a relatively small group of struggling folk knowing there won’t be riots in the streets.
The compounding effect of paying Serco interest upon mortgage interest, just when the turn in interest rates is trending upward, will push more homeowners into the rented sector where likely it will cost the government more than this pernicious policy will ever save.
Sheila says
My mortgage is a Home Retirement Mortgage where I only have to pay the interest, my re-payments amount to £65.00 per month £15.00 of which I have always paid myself. I am now 81 years of age and I still have 40 years to go paying interest. I have not yet agreed to a Serco loan and I will go without to pay the interest myself as I refuse to let this Government like something nasty they have trodden in.
Sara (Debt Camel) says
Hi Shiela,
I think you should get some advice on this. Could you go to your local Citizens Advice? Although your reaction may be that the government is treating pensioners like yourself very badly, in practice the loan they are offering is very cheap and on very good terms. “going without” in order to avoid it may not be sensible idea.
Brenda Smith says
Received my letter yesterday and put off reading it until this morning. Basically, they are coming after the equity on my property, cheap loan or not; then if I have to go into care, they will take the rest.
I found myself homeless at age 58, through no fault of my own; my husband had got us into debt and our house was repossessed. I then managed to get a £60,000 mortgage @ 10% interest for a flat, as I had CCJs against my name, which I knew nothing about. I had to work two jobs to met the payments every month.
After four years house prices increased, so I moved from Buckinghamshire to the West Midlands and was able to put £60,000 towards an interest only mortgage on a 3 bed semi. This now has £60 to £80,000 positive equity, for which I have worked very hard indeed. I am on a low income and quality for Guaranteed Pension Credit.
I should have gone to the Council when I was homeless and asked them to rehouse me!
Gareth Morgan says
I am puzzled by the 2.2% that Serco are quoting. The regulations, although convoluted, seem clear.
They say:
15. (3) The relevant rate is the interest rate for the relevant period.
15. (5) The interest rate referred to in paragraph (3) is the weighted average interest rate on conventional gilts specified in the most recent report published before the start of the relevant period by the Office for Budget Responsibility under section 4(3) of the Budget Responsibility and National Audit Act 2011(a).
(6) The relevant period is the period starting on—
(a) 1st January and ending on 30th June in any year; or
(b) 1st July and ending on 31st December in any year.
The latest forecast by the OBR was published in March 2017 but there is expected to be another one at the time of the autumn budget in November.
The forecast in March covered a range of years and shows
Percentage change on previous year, unless otherwise specified
Outturn Forecast
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
Market gilt rates (%) 1.9 1.2 1.5 1.7 1.9 2.0 2.2
If the single decimal place rounding is removed the table gives, with more precision:
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
Market gilt rates (%) 1.88 1.22 1.46 1.66 1.85 2.02 2.16
There are two relevant periods in any year – January to June and July to September – and the interest rate is the rate for that period, as 15 (3) states. That is determined by the most recent report by the OBR before the start of that period. It will be November’s report when the new rules come into force but, for now, the latest figures are those in March’s report. If that figure was to be used, which seems the best information to hand, then the rate should be 1.7% for the year2018 / 2019. Serco seem to be using the rate for the year 2021 / 2022.
Why?
Sara (Debt Camel) says
excellent question… I will ask some people for copies of their letter… although the person that mentioned 2.2% said she was told it on the phone.
Ann says
“It is difficult to justify why the taxpayer should assist a homeowner to purchase a property which is likely to be a often rapidly appreciating asset, unlike a property that is rented.”
Why do you say a rented property – usually a buy to let – isn’t an appreciating asset? The owners of a rented out property usually own at least one other house they live in and many people even more. So if they accept tenants on housing benefit they are getting their mortgages paid and the house is appreciating! Whilst people like me – a pensioner who has worked hard all my life – who was made redundant at 58 is being penalised and will probably have to sell my family home. This doesn’t seem right.
denise case says
I completely agree! One law for landlords, property developers and the like and another for those like us. What gets me is the way this was sneakily put through by the government without going through Parliament, and not one paper apart from the Daily Mirror, as far as I’m aware, commented on it! Apparently, According to the Mirror, over half the number affected are pensioners so what does the government care! We clearly don’t matter. The government is not getting a penny from me. So far I have avoided speaking to SERCO AKA DWP as I wouldn’t be able to keep a civil tongue in my head!
Sheila says
I agree with your comments, I have spoken to SERCO and I gave the young lady a piece of my mind as to what I thought of this sneaky Government. What really annoys me is the fact that if SERCO cannot get their loan back due to little or no equity in my house, they can claim it back from then Government so they will never lose out. I sincerely hope this happens in many many cases and that they will have to pay the loan plus interest back to SERCO, and that is what I call Karma. We already have Food Banks, homeless living on the street, what next bringing back the WORKHOUSE for the poor and vulnerable.
Rant over.
Deni says
That’s one reason why SERCO shares continue to rise! They will never lose out! George Osborne has a lot to answer for. As does Age Concern for supporting this despicable fiasco. We should keep ranting- someone of note somewhere might pick it up and run with it. I repeat, the media silence has been deafening!
B Caffrey says
I’m in the same Pension person boat, wondering how long after this Tory invented policy will result in Serco robbing me blind of my long gathered equity. Vicious Tories are taking away the natural right of home security, so much more important in retirement, and I am not in the slightest surprised by the almighty panic I am reading on these pages. So with mass pensioner homelessness in prospect, those Tory enemies of the people will not want confused pensioners staggering around the streets, because that would bring their filthy lies into the light of day. And the upshot will be the reopening of the Workhouses, to put us all away … Abandon Hope all Ye Who Enter This Place.
When will Tory Voters ever wake up to the fact that Tories are the Enemies of the People. and that when the French had their glorious Revolution when they had been starving on the streets, we should have done the same. And … what’s different now to then?
Anyone who doesn’t like my words of truth should at least understand and accept that it is Tories who are launching this full scale attack on defenseless poorer pensioners. Get real, and stand up with one voice and fight back!
Sara (Debt Camel) says
You could write to your MPs – email addresses here: http://www.parliament.uk/mps-lords-and-offices/mps/.
denise case says
Thank you. I intend to do just that and would like to copy in some of the comments here to show the strength of feeling. I have already drafted a letter to my MP expressing my outrage and I think we all should do the same, copying in all our views as expressed here. Similarly, as someone said above, the media should be told. Does anyone have any other thoughts
Sheila says
After reading the comments made by Shelter regarding why should homeowners pay for the less fortunate, 62,000 Pensioners at present are affected by this new law and we have all paid tax when we worked and it did not enter my mind to complain about my taxes being used to help the vulnerable and poor, in fact we still pay tax in the form of VAT. Feel free to copy any of my comments and I wish you luck.
Laurel says
I believe we should form a pressure group or a change.org petition to draw attention to this disgraceful change in the welfare benefits.
Especially as it mostly affects people who are by definition the poorest members of society, pensioners on pension credit. Added to this it will fall disproportionally on elderly women as they make up the majority of pensioners on pension credit because of historical employment due to part time working and raising families. Added to this the short notice and lack of preparation for any training with mortgage providers/ housing associations make pensioners very vulnerable to either being forced to agree, or going without, as many of us will choose to do, having invested in our homes. We should also draw this to the attention of the Shadow Minister for Work and Pensions.
denise case says
I agree, Laurel. The whole thing is an outrage. I have drafted a letter to my local MP who is unfortunately not only Conservative but standing trial for election expenses fraud next year! Just to add insult to injury! I don’t expect much joy from any reply. What do you suggest? I posted on Facebook twice and gathered a few angry comments about the whole thing but it’s not enough. A change.org petition may be the way to go.
Sheila says
I totally agree with you, I would rather go without than accept a loan from Serco. I am 81 years of age, and can do without problems like this, thanks to the DWP who are really scraping the bottom of the barrel with this
Gareth Morgan says
DWP have now accepted that the loan rate, at the moment, should be 1.7% and they’re amending the script for calls.
Sara (Debt Camel) says
well done – I wonder where the 2.2% came from?
Gareth Morgan says
It’s the last rate showing in the OBR table but it’s for 2021/2022
Chrissy says
How come the dwp are doing this to people they pay 60 per week 240 per month help towards my dads mortgage yet they pay 750 pounds for our neighbours private rent,and my dad worked all his life yet neighbours get all that paid wonder if they hit private rents
Poppy says
I am 60 live alone and have border line personality disorder hence being on benefits. I get help with my mortgage but have no idea how to work out how much this will cost me if I accept the loan, (I see no other way than accept until I am ready to sell) there is enough to cover the mortgage loan when I sell, and I have no family, so all in all I am alone and have no idea who to ask for the best advice.
I am not against paying something for the help I have received, but I know people who rent and get much more help than me, they have no penalties applied to their payments, so why should we.
I thought the persecution was over, seems like it is hotting up again.
Sara (Debt Camel) says
CAn I suggest you go to your local Citizens Advice? Just talking to someone else about it may help you.
Poppy says
I would but it means a 25 mile trip, and telephoning them is almost impossible, plus they were never much help with my benefits questions.
It’s the figures I need as to how much they will take maybe age concern might be better (then does anyone know) it seems even the building societies are in the dark pretty much.
Always, always a fight to just get on with life.
Sara (Debt Camel) says
The figures should be straightforward. If you are getting £90 a month help towards your mortgage at the moment from SMI, you will still get the same £90, but that will be recorded as a loan. So by the end of a year you will have borrowed 90 * 12 = £1080. The interest rate charged on the loan will be 1.7% which is likely to be less than you are paying on the mortgage.
Poppy says
Thank you, much appreciated.
Have to do some sums, don’t suppose the Cons will back track on this so have to weigh it all up.
Sara (Debt Camel) says
Good idea, getting real numbers makes it easier to think about.
Gareth Morgan says
Not quite, the interest is compounded monthly. “15(2) Interest at the relevant rate shall accrue daily, with effect from the first day a loan payment is
made to a qualifying lender or the claimant under regulation 17, and shall be added to the
outstanding amount at the end of each month (or part month).”
What that means, using your example figure of £90 a month loan, is:
Month 1 – £90 – plus interest added of 13p from £90 x 1.7% divided by 12. Amount owed £90.13
Month 2 – £90 – plus interest added of 26p from (£90 + £90.13) x 1.7% divided by 12. Amount owed £180.38
At the end of the first year, that means the total owed is £1,090.00.
It’s slightly complicated by the fact that the calculation of the loan is weekly for Pension Credit and working-age legacy benefits but monthly for Universal Credit while the interest calculation is always monthly.
Sara (Debt Camel) says
Thanks for doing the detailed sums, Gareth!
So the interest added in the first year is only £10 in this example. Naturally the interest will increase as the years go by and the loan gets larger, but this example does show that this SMI loan is not expensive!
I don’t like this benefit being turned into a loan, but I think it’s important that people don’t automatically reject it as it may be the best they can do.
Gareth Morgan says
It’s the joy of compound interest (remember the Mary Poppins song) that make it get increasingly expensive as time goes by. Even though the loan amount may stay the same (it won’t, because gilt rates will change but they may go up or down) the interest on the interest will grow. Here’s a 25-year forecast using the £90 a month (£41, 379 mortgage) figures in the example:
Interest Total recoverable
Year 1 £9.77 £1,090.00
Year 2 £38.22 £2,198.67
Year 3 £85.67 £3,326.34
Year 4 £152.44 £4,473.32
Year 5 £238.87 £5,639.96
Year 6 £345.30 £6,826.59
Year 7 £472.07 £8,033.55
Year 8 £619.53 £9,261.18
Year 9 £788.02 £10,509.85
Year 10 £977.92 £11,779.91
Year 11 £1,189.59 £13,071.74
Year 12 £1,423.40 £14,385.69
Year 13 £1,679.73 £15,722.16
Year 14 £1,958.97 £17,081.53
Year 15 £2,261.51 £18,464.18
Year 16 £2,587.75 £19,870.53
Year 17 £2,938.10 £21,300.97
Year 18 £3,312.97 £22,755.92
Year 19 £3,712.78 £24,235.79
Year 20 £4,137.95 £25,741.02
Year 21 £4,588.93 £27,272.04
Year 22 £5,066.15 £28,829.30
Year 23 £5,570.07 £30,413.23
Year 24 £6,101.14 £32,024.30
Year 25 £6,648.82 £33,662.97
Gareth Morgan says
It is, in effect, a compulsory Equity Release scheme. That means it has the same characteristics and (often unfair) criticisms that can be applied to it.
Poppy says
I am not agreeing with this far, far from it – but it seems we have no choice in this, much like all the other acts this gov have made against those facing hard times.
If my house has enough collateral to cover the the SMI loan is that better at the moment then moving when I am not in the frame of mind or health to do so (should I look upon the years of free help I have had as a bonus) and swallow this bitter pill – only I can make that decision and it’s a difficult one to make.
The problem also (to my mind) is will the BS) be keen to lend/extend mortgages with this added debt/loan being tacked on.
My mind is in turmoil.
Poppy says
Will they be able to alter the interest rate as they see fit or stay within the base rate.
Sara (Debt Camel) says
The interest rate is tied to the rate of interest that the government pays on its own borrowing, known as “the gilt rate”.
In the past, this has always been lower than mortgage rates tend to be.
patricia dunne says
Hi,
I just started the petition “Stop changes to support for mortgage interest (SMI) ” and wanted to ask if you could add your name too.
This campaign means a lot to me and the more support we can get behind it, the better chance we have of succeeding. You can read more and sign the petition here:
http://you.38degrees.org.uk/petitions/stop-changes-to-support-for-mortgage-interest-smi
Thank you!
Patrica
Please forward to as many people as possible asking them for support.
denise case says
Fantastic!! Going to share madly!
Sheila says
Thank you Patrica for starting the petition, I have just signed and hope it is successful
Judy kennedy says
I agree they are happy to pay a private landlords rent in housing benefits. In most cases this means paying the mortgage of the landlord and extra. I am on ESA support and borrow the money to pay my mortgage. I get roughly get £80 month in SMI. If I could not borrow the money I would have jumped off London Bridge long ago. If the landlord to the flat downstairs were to have a Housing Benefit tenant. The Housing Benefit would be £1200 pcm to cover the rent. The landlords mortgage is £600. So the government is willing to pay the private landlords rent and a further £600 profit.
Deni says
I share the petition everyday on social media. May I quote your comment, anonymous of course,? The whole situation is outrageous!
So far there are only just over 100 signatures. This is nowhere near enough. We need to get it more high profile. I wonder what we can collectively do. The WASPI movement seemed to get some kind of result, albeit not totally satisfactory to everyone involved.
Sara (Debt Camel) says
There was a good article in the Mail on Sunday a couple of weeks ago: http://www.thisismoney.co.uk/money/mortgageshome/article-5026745/Take-loan-lose-home-Vulnerable-property-owners-hit.html
Signing a petition is unlikely to achieve much. A few hundred letters to MPs could have a much bigger impact. It doesn’t matter what party your MP is or if you think they won’t be sympathetic, they don’t like getting this sort of letter.
Laurel says
Thank you thank you thank you. I felt too depressed to do anything. It needs to go on You And Yours, and Womans Hour, if anyone has the energy.
Poppy says
I can’t absorb anymore at the moment, just when I thought things might get a little settled, this comes along.
To be honest I don’t think there are enough people this will bother, they say some 140.000 are on SMI – which is small fry in the bigger picture, (sadly)!!
I will have NO option other than to go along with it for the time being, (I think it adds insult to injury to charge interest as well) talk about kicking a horse – when it’s down…
I also feel depressed, so was damn upset this morning I bashed the car into the garage wall and ripped off a part of the front bumper, still who cares.
alice says
“It is difficult to justify why the taxpayer should assist a homeowner to purchase a property which is likely to be an often rapidly appreciating asset, unlike a property that is rented”
I don’t see how that can be the excuse for this draconian policy? The justification for the old SMI was economic sense, secure housing and less cost to the taxpayer. If this change is the short sighted policy making we can expect, then the right to claim Housing Benefit for the rental part of part rent-part buy could also be under threat as this too, helps people to afford (at least that part of) their home ownership).
I see some immediate points that rubbish their theory:
1. Help to buy ISA’s essentially contribute to buying an asset and these are government subsidised.
2. Compound interest is being charged on the loans. At that point it isn’t assisting anyone financially; just creating financial problems for the future.
As a side issue it also means that the DWP are making money on their lending. Apart from this use of compound interest being dubious from an ethical point of view I’m also not sure if they should be straying in to the realms of consumer credit…
3. MPs bought homes with large contributions from their expenses; that was taxpayer’s money. The poor are always treated as if they deserve to be poor, therefore undeserving of any help that might allow them to better themselves . Meanwhile the rich are portrayed as if their affluence is somehow meritorious and therefore deserving of all the hand-outs they can get, irrespective of the lack of need.
4. The relatively low cost of adding SMI on as a benefit was sensible in that it kept people in housing at low cost. The flip side of that is repossessions with associated costs, court costs, people losing their homes and possessions, the added burden on councils providing emergency and temporary housing, rough sleepers, hugely increased Housing Benefit/Universal Credit costs and the inevitable cost to the NHS from mental health deterioration due to the stress to claimants.
alice says
Some quick figures to illustrate what the bare housing costs will be if those previously on SMI lose their homes:
The cost of SMI on a mortgage of £100,000 is around £217 per month or £50 per week. The cost of temporary accommodation in a PSL is around £190 to £270 per week. Emergency B&B around £300 per week per person. City of Bristol LHA rate for a 2 bed house £151 per week (Housing Benefit).
I have been a little dismayed by some of the comments about Housing Benefit claimants with some value judgments made. Needless to say, I don’t think this is the time to be turning on those in even less secure rented housing. The changes forced on them are equally short sighted and also potentially disastrous. This is the time for people to unite against this government’s welfare reform and economic policy. We should not divide ourselves up in to the “feckless workless” versus “hardworking” or “renters versus buyers” type categories that the Tories would have us subscribe to. Like Sara I am an adviser and I see how these policies affect the low waged singles, the vulnerable, low income families and the unemployed job seekers. No-one affected by welfare reform is getting fair treatment here!!
Sara (Debt Camel) says
I completely agree.
M A Dhamial says
I also completely agree. It seems divide and rule concept is applied by this government. I feel government is trying to rob homeowners savings by doing so.
On the point you made earlier, I would like to add for those people who think government is doing the right thing, at this point we home owners are approximately 140,000 affected, who are in receipt of SMI due to 100% genuine reasons, all of them were hard working people with a beautiful future for themselves and the country.
We were not receiving full mortgage help it was only half of our mortgage interest. Now we will face repossessions and move to social housing. Your tax payers money will cover my rent, council tax etc. Are you happy to pay for us. Please think sensibly.
Think of that day when government will decide to make housing benefit as loan benefit, than you will realise how we are feeling today. Would you like to be in our situation?
Me and my wife both have physical disabilities, apart from a list of medications , biological treatments, we also suffer from Anxiety and depression. We have four children 18,16,13 and a 7 years old. We are in receipt of ESA and PIP. My brain is totally frozen and can not make any decision on this matter, can anyone will advise me what’s the best way forward for my family, please explain in simple words what is best for me, my mortgage is intrest only till 2028 on tracker rate.
Kind regards.
Sara (Debt Camel) says
I can’t give you advice on what to do. All I can do is point out some things it may be worth thinking about.
First if you are only getting help with half your mortgage costs, are you already struggling? If you are, you should probably consider renting instead, regardless of this SMI change. Also if your house is unsuitable given your health issues. Your local CAB will be able to help you look at how your benefits would change and may also know more about the availability of social housing in your area.
But if you don’t want to do that, then this loan, however unpleasant it sounds, will let you stay in your house in the same way that SMI at the moment does. Unless there is family that could help out, you may have no better option. It is not expensive, but over time the amounts will build up so by 2028 when your mortgage ends you will have less equity. I don’t know what you plan to do at that point.
As a further complication, your children are growing up. If they are leaving home, you will lose the associated costs but also the associated benefits. If they may be staying at home for w while you need to have a realistic conversation with them about contributing financially – even they are just getting a student loan say.
Dee says
My blood boils with this new legislation.
I worked all my life. Became seriously ill and have triggered health conditions. I’ve managed to keep on top of my mortgage repayments by cutting out any kind of social life and no trips to hairdressers and other ‘luxuries’
I’m unfit for work and don’t think I ever will be able to work again.
I feel mortgage payers are being discriminated against. As far as I’m aware if I was in rented accommodation all my rent would be paid by DWP , if I returned to work as a rent payer I wouldn’t have accrued any debt. ( also in the long run the landlord benefits too)
However as a mortgage payer if I returned to work , whatever the DWP have contributed in SMI would have to be repaid.
The government is happyly promoting buying your own home, but when your luck turns they will stitch you up.
So here’s a thought…. I sell my house, I will be denied any benefits, I live on the equity until it runs out, I then reapply for housing benefit for a rented house. Surely that’s going to cost DWP more money?
It’s blatant discrimination .
Poppy says
I agree with this should not be a rented/homeowner debate, we each choose the path we go down, in some circumstances some have no choice, but it is obvious that owning a home and being on benefits has become a dirty resource (and yet it was this Gov who encouraged people to do just that.
I agree with Dee if I sell my home I will be not allowed benefits, until the money runs out then what – knowing the way things are at the moment there will probably be no help at all.
Why should people who have kept their heads down asked for nothing for over 40 years be penalized for being ill and living in their own home.
Things today when buying a house are different, people get insurance for the bad times, I am not sure that was thought about years back, jobs were a plenty, and the welfare state worked without any discrimination.
It stinks that ‘we’ are being targeted, for doing what was once the ‘ethos’ of this Country, put your money into bricks and mortar.
Heather Enid Wells says
I am on Pension Credit, and from the letters I receive from the Dirty Washing Parade oops Department of Work and Pensions, it appears that my SMI is taken off my Pension Credit in the first place. So when SMI ends, does that mean that that portion of my Pension Credit will be restored and paid to me?
Sara (Debt Camel) says
I don’t think SMI reduces your Pension Credit at the moment. You could take the letters to your local Citizens Advice and ask what is happening.
Dee says
It’s DISCRIMINATION in a nutshell.
Don’t buy a house : you are responsible for upkeep and maintenance. If you become unable to work, woe betide.
You will either have had to sell up or become in arrears with mortgage payments, forcing reposssesion or become in debt ….
Rent a house: not responsible for maintenance. Rent will be paid for you, return to work, no debt… quids in there.
I wish I had never got a mortgage, because of serious health issues I’m unable to work, I already go without so much, the stress this is. Siding might just about finish me off. Discrimination by the government because I don’t rent.
Equality? What equality?
Fairness for all? That will be a no then.
Sara (Debt Camel) says
There was a bit on the SMI changes on Moneybox on Radio 4 today, see http://www.bbc.co.uk/programmes/b099tf51. I#m not sure how long that link will work for.
Poppy says
Listened. nothing new really outside of saying the form we have to fill in is 64 pages long, and likely to put a lot of people off coupled with UC coming in lots of people are going to be lost with all the change.
Some people are going to be worried to death over this, what a vindictive government we have targeting those who need the most help.
I wonder who is going to buy this influx of property that is about to come on the market, house sales in the North are struggling as it is.
Still no use complaining is it, not like anyone is listening or really that concerned.
B Caffrey says
Dear Poppy
I’m about to lose SMI myself, and like many others on here, the weekly amount I will lose is very small in comparison to what housing benefit would pay to cover equivalent rent robbery. In fact, the £30 weekly payments contribute only about half of my monthly payment to the Building Society.
There is however real value in complaining … the question then is to whom best to complain to achieve concessions or other change impact. Sadly, I am not convinced that Debt Camel protestations are likely to be noticed, and brought to the attention of relevant sympathetic politicians. Perhaps, in unison, we all need to scream out louder.
denise case says
Totally agree! I have signed the petition and share it every day on social media and have shared vis email. I have also told my friends and others who are all suitably disgusted and appalled. Sadly the petition doesn’t seem to be getting much exposure as last time I looked, only just over 100 people had signed, the latest being a friend of a friend of mine! Writing to the national press maybe. I posted earlier that I had written to Martin Lewis about it but to no avail. My MP is under investigation for a fraud matter and anyway is a Tory. I can be found on Facebook under deni case if you’d like to meet up there.
Poppy says
My MP is Tory and a supporter of the benefit cuts/changes always votes for them.
I have written to ask questions and complain – but it seems to be falling on deaf ears, even noticed on some help welfare boards people with their own property get little support/replies to questions asked.
The link to the BBC moneybox programme was 4 minutes in total, and really gave no help or hope, I think the trouble is a lot of people (far more) then who get help with their mortgage do not understand how SMI works, they think we are getting our property paid for, and that angers them. That people have worked for their house, and fallen ill or lost their job through cuts backs carries no weight, we are all tarred with the same brush, comments like ‘if you can’t afford to buy – then don’t’ are rife on the internet…they forget many bought long before the mess this Country is in, reared its ugly head.
Poppy says
The Building Societies Association reply/views on the SMI changes – guess they were ignored although they are not fully against it.
https://www.bsa.org.uk/BSA/files/98/981003b5-f943-4744-8b04-ea49feaf681a.pdf
denise case says
Interesting. Thank you. Not much at all said about senior citizens on pension credit, sadly. That should be an exempt category! I am promoting information in the media and the petition as much as I can. It needs more of us involved however.
Karen says
My 82 year old mother has had the call from SERCO, the lady told her she would have to get the permission / signatures of her family (myself and 2 siblings) on the loan agreement. My mother lives alone, and has done since she purchased her house in the 1980s. Having read the (scant) info available online, I cannot understand why she was told this. She is very worried about all of this, and is considering selling her home, but once the mortgage is paid off, we have worked out that she will have about 8 years of funding available to pay a modest rent – what happens then?
Sara (Debt Camel) says
Is the mortgage in her name only?
Karen says
Yes, she took it after she had divorced
Sara (Debt Camel) says
This is strange so I’m going to ask some more questions, sorry if you feel you are repeating yourself… So there is nothing connecting you and your siblings to the house? You haven’t loaned your mum any money and taken a charge over the house? You don’t have power of attorney for your mum? Might Serco have thought your mum didn’t understand what was happening and have suggested she talks to her children?
Karen says
That is the only answer I can think of, and I put it to mum, but she is adamant that she was told our signatures are also required!
It is possible that she misunderstood, and they were suggesting we may be able to either advise, or even take over the smi loan portion for her, but apparently they are not allowed to give advice, so it shouldn’t have been the latter.
We are nothing to do with the house, nor do we have power of attorney.
Sara (Debt Camel) says
This doesn’t sound right. Could you phone them yourself or (if you can;t get through security) ask your Mum to ask them to write to her saying why your signatures are needed?
Coming back to your other point, which is that she is so worried she is thinking of selling the house… is this an interest only mortgage? when does the mortgage end? Unless you can help her out, taking this loan is very likely to be her best option.
Gareth Morgan says
Is she the sole owner?
Karen says
Yes, she is sole owner
Gareth Morgan says
Then Serco are wrong. She’s the only person involved.
Karen says
the difficulty is that I am in Ireland, so I can’t get to see all the paperwork – I think I will ask her not to do anything until I can get there to read up on everything …… I don’t know when the mortgage ends, it was a full mortgage originally, until she was made redundant shortly before she was 60, she went to interest only about 10 years ago
Sara (Debt Camel) says
ok, there is no great hurry to get this loan paperwork signed. But your mum probably does need some help in looking at her options when the interest-only mortgage ends… this is a much bigger problem than this SMI loan. Because of her age, some form of equity release may be a good idea and if her mortgage is ending soon, it could be a good idea to look at this now.
Karen says
Thank you Sarah for your advice, when I next visit I will follow up on all this :-)
davo says
but it’s fine for mp’s to get the interest/mortgages paid on their second homes and keep all the equity themselves without paying a penny back to tax payer
Dee says
Absolutely, it’s a disgrace.
I’m wondering too if the initial waiting period before any assistance is the same for renters?
It’s down right discrimination in its most evident form .
All the promoting of ‘help to buy’, bla bla bla ….all well and good until you can’t through no fault of your own pay your mortgage, but worry not, the fairy godmother GOV will help you GET INTO DEBT buY forcing you to lend money .I’ve worked all my life up until being diagnosed with cancer, divorced with two dependent girls. This stinks and they are going to get away with it. I’m furious
Sara (Debt Camel) says
No, there is no long waiting period for help with housing costs for people renting.
John says
This is such a good point. Corrupt, heartless Tory meanness, grinding ordinary people into more profit for the rich; when will this country Wake up? The cost of Osbourne’s opulent lifestyle – the welfare of hundreds of thousands of decent citizens. Is this why 52% of those who voted in the EU referendum voted leave? so that we could all enjoy unbridled Tory policy at its compassionate best?
philip says
Thank you Mrs may /dwp just received leaflet today. I am now disabled but worked all my life 60 to 70 hours per week until i had spinal cord injury and have little equity in my property. and my mortgage supplier has already refused another charge to be put on the property due to lack of equity so i basically will have to sell my house in the next 6 months and go into rented property which is going to cost the government 3 times more than they pay now in help with the interest. great logic there. What will the conservatives do next firing squad for all disabled as we are now just a drain on their finances OR JUST HOPE WE BECOME SO DEPRRESED WE COMMIT SUICIDE. i feel for everyone in same situation elderly and disabled getting screwed over by this government. Ohh well i still have universal credit to look forward to as well [sighhhh] as im still on esa at min
Sara (Debt Camel) says
Have you talked to your mortgage lender? most of them have agreed they won’t refuse this SMI charge.
philip says
Not spoken to them yet but they refused a charge been put on the property for disability adaptions by the council so dont hold out much hope
Sara (Debt Camel) says
Worth trying…
Neil says
Jeeeeeez something else to worry about, from being a carpenter of 14 yrs since school working all hours to provide a home for my family and never claiming anything to being a single father diagnosed with muscular dystrophy trying to provide for my 2 dependant children relying on benefits and fighting constantly to keep my (disable friendly adapted house) from being repossessed, I have been told from a serco adviser who worked out that ive now got to find another £1800.00+ a year extra on top of my regular mortgage repayments and household bills. Or ask friends and family to help (yeah as if I’m not already a burden to them) or talk to your mortgage provider, from the last 7 years experience Banks/mortgage advisors don’t touch disabled people with a bargepole.
I feel for all other people affected by this cut/change in benefit. GOOD LUCK
Gareth Morgan says
You won’t have to actually pay anything extra now
Neil says
No, but but not far in the future due to my deteriorating condition I think I’m going to have to move to more suitable accommodation bungalow/single story and the SERCO advisor said that if I move home the loan payment will have to be paid off and a NEW 39 week process would probably have to start.
I’ve been in my home for 17 years,
7 years since I had to finish work and start a new repayment mortgage with the help of smi I have 23 years left on mortgage and going on the advisors calculations I’d owe about £44,000.00
Gareth Morgan says
As long as you don’t stop receiving the benefit for more than 52 weeks then there is not another 39-week wait. On your figures, I’m assuming that you have a mortgage of about £69,000 in order to get SMI payments of £1,800 a year, then I don’t see where the Serco figures come from about what you’d have to repay.
On the current SMI and loan rates, (and they will change) then after 23 years I’d calculate a repayment due of loan and interest of about £50,700. I suspect that they are using non-current rates somewhere.
BUT
(and this is the justification used for the whole loan scheme)
Your house may have increased in value over that period. Assuming a value today of £100,000 then the effect of house price inflation (HPI) over that 23 year period will be:
1% HPI – new value is £124,471
2% HPI – new value is £151,566
3% HPI – new value is £191,610
4% HPI – new value is £236,991
To have the same amount of equity as now, after repaying the loan, would need HPI of about 3.11% using today’s rates. The medium term forecast of the Office for Budget Responsibility is 4.7% in 2022.
Gareth Morgan says
I should add that that HPI break-even rate will vary, depending on how much equity there is in the property.
Neil says
I have a mortgage of £78,000 left, the serco advisor just rounded off my smi payments to £150pm to what i would approx owe in a year £1800 and then 10 years £18,000 and £44,000 in 23 years.
I’m glad yr doing the maths as it just go’s over my head ?
When my mortgage ends in 23 years do I have to pay the loan back then or until I eventually sell the property or kick the bucket?
The serco advisor said there’s more information in the pack that will be sent 3 weeks but it’s on my mind all the while. Thanks
Sara (Debt Camel) says
Is your mortgage a repayment mortgage?
Gareth Morgan says
That’s not rounding off; that’s almost criminally misleading. On a £78,000 mortgage, the SMI loan payment will be £169.65 a month. That’s over 10% out; The loan amount will be £2,036 a year.
On current rates that means the 10-year figure would be £22,205 including £1,874 interest. In 23 years the figure would be £57,329 including £10,505 interest.
If they really are quoting a figure that’s almost only 75% of the likely debt, then I’d put in a formal complaint and ask for a transcript of the recording of the call.
You won’t have to pay back the loan when the mortgage ends; just on sale or death.
davo says
serco say the alternative to the smi loan is speak to your mortgage provider or seek help from family or friends but i wonder if the dwp will treat the help from family or friends as income and deduct what help a person receives from family or friends from any income related benefits they are in receipt of
Sara (Debt Camel) says
“i wonder if the dwp will treat the help from family or friends as income” no they won’t. This isn’t something you have to worry about.
davo says
do you mind me asking were the dwp have stated they will not treat regular monthly payments by a generous friend or family member as income
Sara (Debt Camel) says
Because they just don’t. Gifts are gifts and not income. For example you would never be taxed on them. And no matter how regular they seem to be, they could stop at any time.
I am a Citizens Advice adviser, I deal with benefits a lot. This is not going to be a problem.
Gareth Morgan says
For Pension Credit the rules lay down what counts as income and these payments aren’t included. For working age benefits there are specific rules disregarding them.
denise case says
I wonder if anyone has had any luck with appealing to their mortgage providers (I think not!) or with help from family/friends. Many pensioners in these straits may not have family/friends around to help and speaking for myself, if I had such wealthy family or friends, I probably wouldn’t be in this situations! Hobson’s Choice from an evil, vicious, inhuman government!
Sara (Debt Camel) says
I am not sure what a mortgage provider is supposed to do!
Anna Wells says
I am 54 and am on disability benefit of ESA. I am very worried about this and like others, before becoming ill through no fault of my own, had on average three jobs, worked every hour god sent, was not going out and globe trotting on holiday like most iof my friends. I got on the property ladder at a relatively early age. Working long hours I obviously paid more national insurance and tax. Surely this insurance I paid was to cover me in such a situation. A private insurance company would have had to pay out so why should a government run one get away with not paying out when needed?
My question is that I need to move due to the neighbours from hell. Again, not of my choosing but cannot live like this forever more.
How will moving affect this SMI loan? Apparently my mortgage is portable but not sure if it is still portable under my circumstances?
I feel totally trapped.
My daughter also has a share in the house. We both had some inheritance from a relative and she was under 18 at the time. I was told I could use her share of the inheritance to purchase a house if it was for her to live in at the time. The solicitor apparently wrote into the deeds that a third of it was owned by her when it was sold.
How will this affect the SMI loan please?
Thank you. Very helpful website by the way.
Sara (Debt Camel) says
Has your mortgage lender confirmed your mortgage is portable? If not, you need to ask them, as sometimes “portable” means you have to meet standard mortgage criteria, which you presumably wouldn’t. This is before SMI is even considered… Also you may need legal advice because of your daughter’s share. I can’t tell from what you write if she owns 1/3 of the house or has a beneficial interest in 1/3 of the equity. If she was under 18 a trust of some sort may have been set up. If you moved to somewhere smaller, could you afford it with no mortgage?
I have asked these questions because they are things that you are going to need to think about, not because I am going to be able to help with the answers. If it is essential that you move, the SMI issue is minor compared to the other complications.
Anna wells says
Hi Sara. Thank you so much for your reply.
I did wonder if my mortgage would only be portable if I was working.
My daughter put a third of the purchase price in and so would be entitled to a third of the current value as I understood it from the solicitor at the time. Although I applied for the land registry record of the title and my daughter was not mentioned only my name so maybe I need to look into this.
I couldn’t afford to move if I paid off the mortgage as I live in an expensive part of the country.
Looks like I am trapped here with the Serco loan.
Thanks for the wonderful website.
Sara (Debt Camel) says
If your daughter was under 18 at the time, she couldn’t legally own property but there would probably have been a trust set up. An option that may not appeal is moving to a cheaper part of the country.
poppy says
What I find shocking is the state of some of the rental property, the DWP are paying landlords for appalling rental/living conditions and the landlords get away with it.
So they are prepared to make people sell up, to then line the pockets of these cheap skate landlords, what the heck are they ‘on’.
robert says
I am on pension credits and get morgage interest payments. I was under the impression that at the moment it is deducted from the amount I get. If I take the SMI loan do I get my full pension credit restored?
Sara (Debt Camel) says
I don’t think SMI reduces your Pension Credit at the moment.
Gareth Morgan says
At the moment SMI is part of the Pension Credit entitlement shown but is paid to the lender, reducing the amount paid to the recipient. In future the Pension Credit entitlement shown will be lower as the loan amount is not included. The actual amount paid should still be the same.
robert says
thank you your answer makes it vert clear thank you
Harry says
Currently, my friends on Pension Guarantee Credit; has a small interest only mortgage; no endowment policy / no savings. DWP pay £80pm and my friend £35pm.
My friend’s choices now seem to be:
A. Don’t take the DWP Loan; just pay the mortgage £115pm and consequently lose their PC and all their pass-ported benefits too. Won’t they? (Currently all their Council Tax is paid). With no PC; no pass-ported benefits and no DWP monthly mortgage assistance, this option will not be affordable.
B. Ask to switch to a repayment mortgage. This would give an end date to the debt but monthly repayments would probably be prohibitive; they will not receive any DWP assistance to pay it and they’ll lose their pass-ported benefits.
C. Borrow from a relative to repay the outstanding mortgage. They will still loose the PC and the pass-ported benefits AND owe the amount loaned (and possibly interest) to the relative.
It seems like blackmail to me, they have to take the DWP loan in order to keep the Pension Credit and the pass-ported benefits. Is that correct? Do they have any other option if they are to keep their PC and pass-ported benefits?
PS – I have noticed paragraph 7.12 in this document but, I admit to being confused by it: http://www.legislation.gov.uk/uksi/2017/725/pdfs/uksiem_20170725_en.pdf
Do you have any views on / thoughts on / explanation of this paragraph?
Anyone pensioner who has a interest only mortgage and no way of repaying it will be in this situation.
Laurel says
She will still get her Pension Credit, and the passported benefits if she opts out of the SMI loan. She will have to find the interest payments though. Pension Credit is awarded if your state pension falls below a certain figure.
denise case says
Thanks. Some good points made here. This is exactly my situation. I look forward to the response.
Sara (Debt Camel) says
“they have to take the DWP loan in order to keep the Pension Credit and the pass-ported benefits. Is that correct?”
No, it is totally wrong. If they don’t take the SMI loan it will not affect their Pension Credit.
Eleanor Cordiner says
I am on guaranteed element of pension credit and presently DWP pay SMI to mortgage lender. I am in the position that I have some savings and am considering not taking out loan and trying to cover the extra payment myself. Also mortgage is not large now and has just 3 years to run. My question is this: if I choose to cover the extra payment myself my savings will obviously decrease over a period of time so will this mean I will get extra pension credit if and when this happens.
The leaflet on SMI from DWP seems ambiguous in places. It states to ask family or people to help you. Can any family member help (I live alone) or do they have to live with you.? Also will this not count as income and will therefore decrease your benefits?
Sara (Debt Camel) says
Your mortgage has three years to run – is this an interest only mortgage or a repayment mortgage?
The DWP doesn’t care where the family live, they are just pointing out this is could be an option for some people. That doesn’t mean it is a good one for you necessarily. Help from family will not count as an income.
Harry says
Sorry, I seem to have left one fundamental piece of information out of my post:
My friend’s income is borderline on the applicable amounts. The housing assistance allowance is what increases the applicable amount to provide entitlement to PC. Without the housing assistance allowance the income will be above applicable amounts and therefore I believe, there will no longer be an entitlement to PC/pass-ported benefits.
So, it seems to me the only way to keep the status quo as far as the PC is concerned is to accept the loan and thereby keep SMI (But incurring an ever-increasing debt and charge in favour of DWP on the property in addition to paying towards a never-ending interest only mortgage). This is why I was interested in your views on the para 7.12 of this document
http://www.legislation.gov.uk/uksi/2017/725/pdfs/uksiem_20170725_en.pdf
I hope I’ve explained the situation a bit clearer this time.
All this change seems so sudden and is so life-changing for those affected. The problem seems to be that it affects so few people; publicity to seek amendment will be difficult. Just as everyone on this post is saying; it is either making people go into debt or lose their homes. Such a small change from the Governments perspective, for such a little short term if any, gain. The Government will be having to rehouse these people if their homes are repossessed.
Sara (Debt Camel) says
And I am again going to ask whether this mortgage is a repayment mortgage or interest only. Sorry but with a mortgage ending in 3 years, that is what needs to be focussed on! If it is an interest only mortgage, then if your friend can overpay it, that would probably be a more effective use of any available savings as the mortgage interest rate is likely to be higher than the rate charged on the SMI loan.
Gareth Morgan says
Accepting the loan will not keep Pension Credit but if the only reason why Pension Credit stops is because of the loss of SMI then the loan will still be available.
Harry says
My friend has an interest only mortgage. As at March 2018 it has 2 years and 2 months to run. My friend has no savings but is continuing to pay the £35 per month shortfall between A. The monthly mortgage payment due and B. The current SMI amount that is being paid direct to the lender. However, when the mortgage ends there will of course be a capital element to repay which it was hoped the lender would just extend the mortgage to cover.
Thinking this through, we potentially have two problems here, losing the PC & Pass-ported benefits (either in April 2018 – if the SMI Loan is declined or in 2 years 2 months (if the loan is accepted) when the SMI Loan will end) and what if the lender won’t / can’t provide a loan to cover the capital element; that is something my friend will need to consider.
If a further loan was obtained to cover the capital element I presume no new SMI Loan would be available in this respect.
Laurel says
Harry, the housing element is consequent on the Pension Credit not the other way round. So loss of SMI doesnt mean loss of Pension Credit and its passported benefits, although of course SMI was a passported benefit. Your friends Pension Credit element will remain the same whether or not the loan is taken up.
Sim says
Sign the Petition to stop this Tory attack on the most vulnerable homeowners.
https://you.38degrees.org.uk/petitions/support-for-mortgage-interest-smi-to-be-stopped
Peter Adams says
We need to raise this on Twitter to the labour party, so it can be debated in Parliament! It is a degrace that this has been slipped through quietly & will
effect so many vulnerable people while people on housing benefit are unaffected. It is discrimination against homeowners .
Sara (Debt Camel) says
Use Twitter if you want, but writing to your MP, whatever the party, may well be more effective.
denise case says
I agree, Peter! It’s also a disgrace that the mainstream media has mostly ignored the whole thing. The online petition slowly garners signatures but will never pick up the speed it needs because in the grand scheme of things, what’s 140 thousand odd vulnerable people to anyone else as long as they’re not affected?! I have strongly worded letter ready to go to my MP but I hold out little hope. However I have told him not to bother replying with the usual jargon filled and meaningless language that politicians so love to use! A waste of his time and mine! Peter, I am on Facebook if you would like to contact me and maybe we can get something rolling alongside the petition. The trouble is that everyone affected by this feels isolated-we need to group!
devry souayed says
response from MP re an email I sent about SMI:
Thank you for your recent correspondence, raising issues arising from Government policies which are the responsibility of this Department. Government Ministers receive a large volume of correspondence and they are unable to reply personally on every occasion. I have been asked to respond.
I was sorry to read of your ill health and the difficulties you have been experiencing.
Whilst I appreciate your concerns, I can explain that claimants have to serve a waiting period before help can be provided towards their housing costs because it is reasonable to expect that homeowners should make arrangements, working together with their lenders, to meet their housing costs during short terms of unemployment and sickness. It is also important to note that the purchase of a home involves the acquisition of a valuable capital asset and a fair balance has to be struck between the needs of homeowners and the cost to taxpayers.
Support for Mortgage Interest is means tested as an integral part of the income-based benefits, and is targeted at those who are on low incomes and have capital/savings under £16,000.
If a claimant has worked and paid National Insurance, and is awarded a contribution-based award of Jobseeker’s Allowance or contribution based Employment and Support Allowance, that does not prevent them from benefiting from the Support for Mortgage Interest measures after 13 weeks, so long as title to the income-based benefits is established. Support for Mortgage Interest provisions were carefully worded to ensure that claimants who establish entitlement to an income-related benefit as a top-up to contribution-based Jobseeker’s Allowance or contribution-based Employment and Support Allowance can receive Support for Mortgage Interest after 13 weeks.
Sara (Debt Camel) says
oh dear. Would you like to name this MP?
Whoever replied (and it sounds as though it may be a civil servant not a member of the MPs staff, which makes it even worse) hasn’t noticed that the SMI waiting period was increased from an OK 13 weeks to a very harsh 39 weeks in April 2016. And there is no comment on the problems being caused by the change for a benefit to a secured loan, which I assume is what you actually wrote about?
Dee says
For completeness, I should also explain that a mortgage protection policy ensures that a borrower’s mortgage payments are met during the waiting period before benefit help with mortgage interest can be paid and may also go towards those payments that cannot be met by way of benefit assistance.
A mortgage protection policy is an insurance policy taken out to insure against the risk of being unable, either through sickness or unemployment, to maintain payments on a mortgage or loan. The treatment of income from a mortgage protection policy in the income-related benefits depends on how it is paid.
Payments from a mortgage protection policy are regarded as income for benefit purposes, but the amount used towards the costs associated with a mortgage is ignored. These costs can include repayment of capital on the eligible loan, endowment payments, related insurance liabilities including building insurance, and interest on the eligible loan that is unmet by benefit. It is only the amount in excess that is needed to discharge the liabilities secured on the home that is offset against benefit entitlement.
Harry says
This makes interesting reading:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/634132/public-attitudes-towards-taking-up-support-for-mortgage-interest-as-a-loan-rr-941.pdf
Harry says
On the DWP Website https://www.gov.uk/support-for-mortgage-interest/print Their last sentence (quoted below) specifically says: “There’s no limit to how long you can get SMI benefit if you’re getting: (among other benefits…..) Pension Credit”. Am I misreading this? or is their site wrong?
“Time limits
You can only get SMI benefit for 2 years if either:
you’re getting income-based JSA and apply for the first time
you started getting SMI benefit after 5 January 2009
This limit won’t apply to SMI loans.
There’s no limit to how long you can get SMI benefit if you’re getting:
Income Support
income-related Employment and Support Allowance
Pension Credit
Universal Credit”
Sara (Debt Camel) says
The site is correct – SMI is time limited at the moment for some claimants.
Are you thinking it is wrong because SMI is ending next year? That isn’t what it is referring to.
And the help that SMI provides is actually continuing after April 2018, it is just being given in a different way, as a loan not a benefit.
Harry says
Thanks for clarification. You are right in what you say. I was thinking it was wrong to say “There’s no limit to how long you can get SMI benefit if you’re getting:
Income Support
income-related Employment and Support Allowance
Pension Credit
Universal Credit”.
I would have expected it say “There’s no limit on how long you can get SMI Loan if you’re getting ….etc”.
It’d be easier if they made a distinction in the terminology.
Many thanks for the site! Great help!
Jen says
So like many I’m confused. Due to becoming very ill after my children were born and children being born with heart problems needing extra care my husband had to give up work and become carer for us . We live in tiny 2 bed flat one bedrooms so small only fits toddler bed in it hubby sleeps on fishing bed me on a Lilo in the lounge no other way around it I can’t move my mortgage as we were with northern rock who got bailed out by nram so mortgage is non transferable anyway. Smi pay 260 a month there is no way I can find that a month literally have about 50 a month left over for emergencys now. When called them today they said can anyone help my reply was who and why an earth would want to help me pay MY mortgage that’s a stupid thing to even say. Ive a 135.000 mortgage and have no idea how to work out how much the serco people would be charging a month. How can they do this to people who generally need help who had a mortgage and tried doing things correctly and supporting their family now being penalized yet all my neighbours dont work and they will carry on getting there rent paid full benefits and living the life of riley but people who need help and paid on to the system are struggling. I am almost certain me hubby and kids will be homeless this time next year but then that will be classed as we voluntary gave up our home when we didn’t we were forced out !
Sara (Debt Camel) says
Sorry quite a few questions: Is there any equity in your house? Do you have other debts as well? How much are you paying towards the mortgage yourself? Do you get disability benefits?
Sim says
If “householder A” has an interest only mortgage of £1oo,ooo
and A’s mortgage provider charges 2.5% interest per annum
then A’s SMI presently should cover the £2,500 interest per year
(some providers charge higher or lower than 2.5% so £2,500 per year is an assumed average)
After April “A” will have to pay the £2,500 or “A” may choose to take a SERCO “loan”.
So SERCO will pay the £2,500 plus 1.74%/per annum additional interest on the new monthly rising debt the government has forced upon means tested home owners. As interest rates rise further both percentage figures will compound the second debt against the house and force many into rented housing at far higher housing benefit cost.
Many are pensioners or disabled but are not significant in numbers. Unlike the rising anger over Universal Credit where millions are effected. This government decided here was a small group they could attack who would be unable to defend themselves. Many will be forced into further debt and poverty. Many will loose their homes.
A mean and short sighted reversal of the 1948 policy by a government that will not save taxpayer’s money but
will cost in misery and far more expense in re-homing many into rented property.
Anna says
How right you are.
I have been looking at transferring a property onto a child/children and would appreciate any advice and comments.
From how I understood it the original homeowner can carry on living there if they pay full market rent and the child/children do not inhabit the property with them. (Otherwise the Housing Benefit will say that the child/children have to house them rent free as they are close family.)
If your adult children ever needed or wanted to come back to live at home then the rent payments would stop for the reason above and also they could turn you out as the property would officially be theirs so this would have to be considered.
But could this be a viable option for some? Can you transfer a house if there is still mortgage outstanding on it?
Thank you.
Sara (Debt Camel) says
This is not likely to work for many people.
You can’t just “give” your house to your children – even if this was permitted by the benefit rules, your mortgage company would not allow it. You could sell the house to them for its current market value, then you could repay your mortgage with that money. If you have capital left over, that could impact your ability to claim Housing Benefit.
Your child could get a mortgage themselves if they want/need to. Having this mortgage could make it harder for them to get a mortgage for their own house. You also need to consider the risk to “your home” if your child gets divorced or is made bankrupt.
Gareth Morgan says
Don’t even think about this without getting knowledgeable advice. There are strict and complex rules about getting help with rent on a previously owned house.
By the way there is no truth in “the Housing Benefit will say that the child/children have to house them rent free as they are close family”.
Sara (Debt Camel) says
A couple of article in the press over the weekend – I’ve added links at the bottom of the article.
Phil Lupton says
so in the letter we receive from time to time, it says that the government says we need ( however much ) each week/month to live off, they
then deduct money from this to may the mortgage provider the interest, this is titled “deductions taken from your employment and support allowance ” do w gt that money back? or are the tories screwing us over even more?
Gareth Morgan says
The extra ‘bit’ in your ESA for mortgage interest support went directly to your lender. The lender will continue to get the same amount, if you accept a loan. The amount that you get directly won’t change.
LharkStar says
Now that the DWP is rolling out the SMI assistance conversion to loans, I just have a question about the interest they will be applying. I’ve had no luck with Serco (speak to Money Advice Service), no luck with Money Advice Service (speak to DWP), and I’m still waiting to hear from the DWP.
The loan will have 1.7% Compound Interest, applied daily, calculated monthly, and I will receive an annual statement.
I’m trying to figure out what to expect in terms of building interest, if I proceed with this.
So, based on £200 PCM, i.e. £2,400 PA, what interest would I expect to pay?
And would this amount increase from year to year? My mortgage is for 10 more years, I am 59 and disabled and unlikely to work being the worst case scenario. Would the interest applied each year keep increasing, year by year, as the debt mounts?
I just am having difficulty getting my head around this Compound Interest thing!
I realise that it could rise or fall from 1.7% over the years, but I’m only interested in a rough idea of what to expect, based on the circumstances I’ve outlined remaining the same, to keep it simple!
I’d be grateful for any advice, thank you.
Angus says
Is it legal for interest to be charged?
Will there have to be some sort of credit agreement?
Sara (Debt Camel) says
Yes it’s legal, this has all been approved by Parliament. There is a legal document that you have to sign – it’s not a Consumer Credit Act agreement because it is a different type of loan.
Sim says
Month Debt Interest added
1 200.28 0.28
2 400.85 0.85
3 601.70 1.70
4 802.84 2.84
5 1004.26 4.26
6 1205.96 5.96
7 1407.96 7.96
8 1610.23 10.23
9 1812.80 12.80
10 2015.65 15.65
11 2218.79 18.79
12 2422.22 22.22
13 2625.93 25.93
14 2829.93 29.93
15 3034.23 34.23
16 3238.81 38.81
17 3443.68 43.68
18 3648.84 48.84
19 3854.29 54.29
20 4060.04 60.04
21 4266.07 66.07
22 4472.40 72.40
23 4679.02 79.02
24 4885.93 85.93
25 5093.14 93.14
26 5300.63 100.63
27 5508.43 108.43
28 5716.51 116.51
29 5924.90 124.90
30 6133.57 133.57
31 6342.54 142.54
32 6551.81 151.81
33 6761.38 161.38
34 6971.24 171.24
35 7181.40 181.40
36 7391.86 191.86
37 7602.61 202.61
38 7813.67 213.67
39 8025.02 225.02
40 8236.67 236.67
41 8448.62 248.62
42 8660.87 260.87
43 8873.43 273.43
44 9086.28 286.28
45 9299.44 299.44
46 9512.89 312.89
47 9726.65 326.65
48 9940.72 340.72
49 10155.08 355.08
50 10369.75 369.75
51 10584.73 384.73
52 10800.01 400.01
53 11015.59 415.59
54 11231.48 431.48
55 11447.67 447.67
56 11664.17 464.17
57 11880.98 480.98
58 12098.09 498.09
59 12315.52 515.52
60 12533.25 533.25
After Ten Years £26177.59 Serco Debt of which £2177.59 is interest.
LharkStar says
Thanks Sim. I’ve done a bit of research and I’m not sure that calculation is correct given the terms of the loan. The interest is compounded monthly:
“Interest at the relevant rate shall accrue daily, with effect from the first day a loan payment is made to a qualifying lender or the claimant, and shall be added to the outstanding amount at the end of each month (or part month).”
So I think it would look more like this, from my calculations, for the first year:
1 200.00/.28
2 400.28/.57
3 600.85/.85
4 801.70/1.14
5 1002.84/1.42
6 1204.26/1.71
7 1405.97/1.99
8 1607.96/2.28
9 1810.24/2.57
10 2012.81/2.85
11 2215.66/3.14
12 2418.80/3.43
So based on that, the first year’s total interest would be £22.23. I haven’t calculated it all the way to ten years, but based on this calculation I think the total interest at the end of the 10-year term would be around £500. That’s not so bad actually, if that’s correct.
Sara (Debt Camel) says
You have pretty much the same numbers :) Sim’s interest column is interest added to date (so on the 12 month line it shows 22.22) and yours is only interest in that month.
Gareth Morgan says
Year 1 £22.22 £2,422.22
Year 2 £85.93 £4,885.93
Year 3 £191.86 £7,391.86
Year 4 £340.72 £9,940.72
Year 5 £533.25 £12,533.25
Year 6 £770.20 £15,170.20
Year 7 £1,052.32 £17,852.32
Year 8 £1,380.40 £20,580.40
Year 9 £1,755.23 £23,355.23
Year 10 £2,177.59 £26,177.59
LharkStar says
Actually just noticed that this calculation was used by someone else above in this thread… Gareth Morgan.
Sim says
61 12751.29 551.29 91 200.28 200.28
62 12969.63 569.63 92 400.85 400.85
63 13188.29 588.29 93 601.70 601.70
64 13407.26 607.26 94 802.84 802.84
65 13626.53 626.53 95 1004.26 1004.26
66 13846.12 646.12 96 1205.96 1205.96
67 14066.02 666.02 97 1407.96 1407.96
68 14286.23 686.23 98 1610.23 1610.23
69 14506.75 706.75 99 1812.80 1812.80
70 14727.59 727.59 100 2015.65 2015.65
71 14948.74 748.74 101 2218.79 2218.79
72 15170.20 770.20 102 2422.22 2422.22
73 15391.97 791.97 103 2625.93 2625.93
74 15614.06 814.06 104 2829.93 2829.93
75 15836.46 836.46 105 3034.23 3034.23
76 16059.18 859.18 106 3238.81 3238.81
77 16282.21 882.21 107 3443.68 3443.68
78 16505.56 905.56 108 3648.84 3648.84
79 16729.23 929.23 109 3854.29 3854.29
80 16953.21 953.21 110 4060.04 4060.04
81 17177.51 977.51 111 4266.07 4266.07
82 17402.13 1002.13 112 4472.40 4472.40
83 17627.07 1027.07 113 4679.02 4679.02
84 17852.32 1052.32 114 4885.93 4885.93
85 18077.90 1077.90 115 5093.14 5093.14
86 18303.79 1103.79 116 5300.63 5300.63
87 18530.00 1130.00 117 5508.43 5508.43
88 18756.54 1156.54 118 5716.51 5716.51
89 18983.39 1183.39 119 5924.90 5924.90
90 19210.57 1210.57 120 6133.57 6133.57
After Ten Years £26177.59 Serco Debt of which £2177.59 is interest.
Above table assumes low 1.7%/yearly equivalent to 0.00141667 % /monthly interest.
LharkStar says
Oh I got it, cumulative interest. The bit I don’t get is, if the cumulative interest at 60 months is £535.25 then shouldn’t the final Serco debt be £24,535.25? i.e. £24,000 (£2,400 X 10) + £535.25?
Where does the £26,177.59 come from?
Sorry if I’m being thick! :D
LharkStar says
Oh I think I got it! £24,535.25 would be after 5 years, not ten!
Disabled Wolf says
I am disabled with complex disabilities and have just had to fight for my DLA to PIP changeover. I cannot answer the telephone yet Serco keep calling. I know it is them as my carer checks the phone every night and they leave messages. The government know I cannot answer the telephone, yet I keep getting calls which is becoming harassment! Do I have to speak to SERCO, or will they eventually get the idea that I cannot hear them, answer the phone etc? All over the Christmas period I was only given Christmas Day, Boxing Day and New Year’s Day off from their constant calling! Do I need to write to my mortgage provider and tell them I refuse the government loan? Before anyone asks, no I don’t have lots of money, at present my SMI is only paying a very, very small amount of interest and I pay the rest. I would rather struggle for the remainder than say yes to this damn Tory government, who got voted in because most people were only worried about Brexit.
Sara (Debt Camel) says
I suggest you write to Serco informing them that calling you is pointless because of your disabilities and ask them to communicate in writing.