When is a benefit not a benefit?

Answer: After 05-04-18 when it’s a loan.

Time flies – or so it seems.  The New Year has barely started and now it’s nearly March – which means that the start of the financial year is just around the corner.  This can be important to many of us because the UK government normally introduces changes to the tax and benefits system in April, which is when the financial year begins.

One change which comes into effect on 06 April 2018 is the abolition of Support for Mortgage Interest (SMI).  This was introduced to help people in financial difficulty and at risk of losing their homes because they couldn’t keep up with their mortgage repayments.  Under the current arrangements SMI may help you if you receive any of the following income related benefits:

  • Income Support
  • Income-based Jobseeker’s Allowance
  • Income-related Employment and Support Allowance
  • Universal Credit
  • Pension Credit.

SMI makes a contribution towards the interest on eligible loans. Payments are calculated using the Bank of England published average mortgage rate.  It can be paid on loans of up to £200,000 and would be paid after 39 weeks for most clients making a new claim who are of working age.   People who receive pension credit do not have to wait before getting help with their mortgage and SMI can be paid on loans of up to £100,000.

From 6th April, the SMI benefit payments stop to be replaced by a loan.  If you receive SMI Payments (or are in the 39 week waiting period) you may have received a letter explaining the changes. You may also have had a phone call from a company called, SERCO which has been apppointed by the government to manage the new loan system.

SERCO employs more than 50,000 people and provides public services covering defence, justice and immigration, transport and health.  It is based just over the county boundary in Hook and recently made the news when it took over a number of health contracts from its failed rival, Carillion, at what was reported to be a hefty discount.

If you are receiving SMI you will have to make arrangements to cover the fact that it will stop after 06 April 2018.  One option may be to accept the SMI loan although the Government is recommending that you get advice from an approved financial adviser first.   If you are unable to pay your mortgage interest payments, you could lose your home after the SMI benefit payments stop on 5th April.

While it is not a financial adviser, your CAB can explain the available options to help you make up your own mind.  These might include:

– moving to a less expensive property;

– rescheduling your mortgage with your mortgage lender;

– if you have saving & investments using them to pay the interest or reduce the mortgage;

– borrowing from friends/family;

– getting another loan from a Credit Union or bank/building society or,

– accepting the offer of an SMI loan (if you do decide to take the loan, Citizens Advice can help you fill in the form although there is no guarantee of success).

For more information and advice on how to deal with mortgage debt (or on debt in general), Benefits, Work, Consumer Issues, Relationships, Housing, Law and Rights, Education, Discrimination, Tax and Healthcare you can

  • call 0344 848 7969 to speak to an assessor or make an appointment to talk to an adviser face-to face. (calls to this service cost the same as calling 01 and 02 numbers included as part of a mobile allowance or a landline call package.
  • visit https://www.citizensadvice.org.uk/ to access our comprehensive range of information and advice,
  • or follow us on https://twitter.com/waverleycab
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