Housing Systems: Combating poverty and sustaining tenancies.
Changes: SMI Changes
Support for Mortgage Interest Changes 2018



  • New Regulations took effect from 6th April 2018 that replace the existing support for mortgage/loan interest for owner-occupier housing and replace it with a system of loans.

  • Help for home owners with other housing costs (such as service charge and ground rent) will continue to be made as now.

  • The new rules affect both new and existing* claimants.

  • And they affect both working age and Pension Credit age claimants. 

  • The new loan system applies to those claimants on the qualifying benefits that provide help with mortgage/loan interest ie Income Support, Income Based JSA, Income Related ESA, Universal Credit and Pension Credit who need and are entitled to help with their home ownership costs. Some of the rules are different for UC.

  • The loan can cover some loans for essential repairs and improvements as well as mortgages.

  • The loans are secured on the claimant's property as a 'second charge' (effectively a secured loan on top of the existing mortgage).

  • The loan itself accrues interest (Currently compound interest 1.5%).

  • Loans are repayable on the sale (or transfer) of the property or on the claimant's death (or when the last member of a couple dies).

  • If there is insufficient equity when the loan is due to be repaid, whatever is available from the sale will be used to repay it and the rest is written off.

  • There is no 2 year limit for Income Based JSA claimants to receive help, as there is with the previous SMI system of support for home ownership costs.

  • And help with Sharia compliant mortgages - called "Alternative Finance Arrangements"will be  available to Pension Credit claimants as well as to Universal Credit claimants.

  • The amount the claimant is entitled to to help them pay their mortgage/loan interest will no longer be added to their applicable amount. Instead claimants on Income Support, Income Based JSA, Income Related ESA, Universal Credit and Pension Credit who have interest to pay on a mortgage/secured loan will be offered a loan.

  • Because of the different way the help is assessed, some claimants will no longer be entitled to an income related benefit (because they were only eligible for a means tested benefit when the housing costs were included). There is protection for some claimants of Income Support, IB JSA, IR ESA and Pension Credit - those whose income falls above their applicable amount but is lower than the sum of their applicable amount and the loan payment. But they cannot be passported onto help such as free prescriptions - although they may be entitled through a different route ie low income scheme.

  • UC claimants, however, cannot be "treated as entitled" in the way described above to help with housing costs through the loan scheme. 

What is the DWP loan?

The loan replaces the current system of help with home ownership mortgage interest/loan payments - often referred to as Support for Mortgage Interest (or SMI).

Instead the DWP will make an offer of a loan that will make ongoing payments to the relevant lender towards the qualifying interest on the claimant's mortgage and eligible home improvement loans.

How will the loans be calculated?

The amount of help offered (and therefore given if the loan is accepted) will be calculated using the standard interest rate and the mortgage capital limits in place under the previous scheme. Payments will be made to the claimant's lender 4 weekly  for legacy benefits and PC; monthly for UC claimants.

Click here for more information for IS, IB-JSA, IR-ESA, GPC claimants.
Click here for more information for Universal Credit claimants.

Interest on the loan is calculated daily and added to the loan on a monthly basis. 
The interest rate charged is based on the Office for Budget Responsibility’s forecast of gilt rates to cover the Government’s cost of borrowing to fund the loans. 
The interest rate can be revised twice a year, with any changes (up or down) taking effect on 1st January and 1st July. Current interest rate is 1.5%.

If the claimant has m
ortgage payment protection insurance payments the loan payments will be reduced by that amount
What is happening and what must claimants do?

Leading up to 5th April 2018, Serco, acting on behalf of the DWP has been contacting existing SMI claimants by letter and leaflet, and a phone call, to inform them of the changes and to offer the loan.

The information booklet and call: 
  • explain the consequences of SMI benefit ending 
  • explain the offer of an SMI loan and how they can accept it 
  • give examples of other alternatives to the SMI loan, and
  • signpost claimants to organisations who offer free help and support. 

For couple claims each member of the couple should have had separate phone calls.

Claimants have to decide whether to accept the loan - either during the phone call or by contacting DWP afterwards: the loan offer can be taken up at any time, by signing and returning the loan documents sent to them by the DWP, so long as the claimant is receiving a qualifying benefit at the time. Acceptance is voluntary.

Loan documents will then be sent for the claimant and their partner, if applicable, to sign and return. DWP will confirm receipt of these documents in writing, and a further letter confirming when their loan payments will start.  

On 6th April 2018*, any claimant who is receiving support with their mortgage/loan interest will have their benefit entitlement re-assessed to remove the inclusion of any Support for Mortgage Interest. As long as they have completed all the necessary documentation the help they have been receiving will be replaced by a loan payment system.  If they do not accept the loan they will have no further help with their owner-occupier housing costs.


DWP statistics show that up to 18th April 2018, only 70 per cent of claimants in receipt of support for mortgage interest (SMI) had been successfully contacted to discuss transferring to a loan and of those who have been contacted, only 25 per cent have either accepted or intend to accept a loan.

* Regulations allow up to 6 weeks from offer of the loan to acceptance, such that although the SMI ends on 5th April 2018, if the loan is accepted within 6 weeks there will be no gap in payment. There is also provision to allow a longer period for claimants who lack mental capacity to arrange for an appointee.

In most circumstances, the SMI loan payments will go straight to the mortgage lender.

For more information go to this page.

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