IMPORTANT: The Support for Mortgage Interest Loan is a loan secured as a charge against the claimant's property and accrues interest. A claimant should always seek debt/financial advice before applying.
The Loans for Mortgage Interest (Amendment) Regulations 2023 were laid on 1st March 2023 and came into force on the 3rd April 2023.
These regulations effectively change the entitlement rules for Support for Mortgage Interest (SMI) Loans for some claimants from the 3rd April 2023.
What does this mean?
- For UC claimants the ‘qualifying period’ which is the length of time that applicants must wait before loan payments can start has been reduced from nine consecutive Assessment Periods to three consecutive Assessment Periods
- The condition that UC claimants must not have any earnings in order to be eligible to receive loan payments has been removed, allowing those who are working and in receipt of UC to make an application for an SMI loan
- A couple does not have to re-serve the qualifying period where a Pension Credit claimant is in receipt of an SMI loan and is making a new claim for UC with a working age claimant, as long as the UC claim begins within one month of the end of the entitlement to Pension Credit
- There is no requirement to serve a new qualifying period for those claimants who return to UC within six months of their claim ending and who want to apply for an SMI loan.
NB - the rules have not changed for those in receipt of legacy benefits i.e. Income-Related Employment and Support Allowance, Income Support or Income-Based Jobseekers Allowance. These claimants cannot make a claim for an SMI loan until the qualifying benefit has been in payment for 39 weeks in a row.
What is SMI?
SMI is a loan to help pay the interest on a mortgage or other home loans for the property where the claimant lives. The SMI loan is subject to certain conditions, and is paid at a set interest rate which at the time of writing (April 2023) is 2.09% (From 10 May 2023, the rate will be 2.65%), on loans up to £200,000 for working age claimants, or £100,000 for those receiving Pension Credit.
SMI cannot help with repayments of the amount borrowed or missed mortgage payments – it just provides help towards interest payments.
To be eligible for an SMI loan a claimant will usually need to be in receipt of a qualifying benefit: Universal Credit, Income-Related Employment and Support Allowance, Income Support, Income-Based Jobseekers Allowance, or Pension Credit.
The SMI loan is secured on the claimant's property as a 'second charge' (effectively a secured loan on top of the existing mortgage/secured debt).
The claimant will pay interest on the loan, which at the time of writing (April 2023) is 3.03% and the loan and interest are repaid when a property is sold, or if the claimant has transferred ownership of their home. The claimant can also choose to pay the loan back at any time they wish and can call the DWP Loan Repayment team on 0800 916 0567 and ask for a ‘settlement letter’ which will confirm the total amount that they will need to pay.
How to claim SMI?
When a new claimant makes an application for UC or Pension Credit, they will be asked about their mortgage costs. If they tick ‘yes’ to the box that asks if they are a homeowner, the DWP will contact them about an SMI loan. If the claimant agrees to the SMI loan, they will have to sign a loan agreement and return the application form to the mortgage lender who will then complete details about the mortgage and return it to DWP. The DWP then makes all arrangements with the lender. The claimant is sent a letter of confirmation and, annually, a statement of the outstanding balance.
If someone already on a qualifying benefit becomes a homeowner, they can report this to the DWP, via their online account if they are a UC claimant, and the DWP should send out an information pack to the claimant about the loan.
If someone already on a qualifying benefit who is a homeowner starts to need help with their mortgage interest (or previously refused the offer of a loan but has now changed their mind), they should contact the office that pays their benefit i.e. UC helpline, Jobcentre Plus or the Pension Service.
How will SMI be paid?
The payments will normally be made direct to the lender by the DWP, but may be made to the owner i.e. the UC claimant, where the loan is not made by a qualifying lender.
IMPORTANT: A claimant does not have to accept the loan offer and should always seek debt advice before agreeing to a SMI loan.
See our Help for Homeowners section of the website for more information