Say Goodbye to Support for Mortgage Interest Benefits!

The Support for Mortgage Interest (SMI) benefit has been helping financially constrained people for more than 70 years, but it will soon be replaced. Why is this? And what could it mean for property owners? Our mortgage brokers reveal all.

How Did the SMI Benefit Help?

This scheme currently allows homeowners on certain benefits to pay the interest on their mortgage using direct payments to the bank. First introduced after the second world war, it was intended to and has helped those who have lost their job or fallen ill.
The SMI benefit is claimed by around 124,000 people, 57,000 of which are pensioners, and costs the country £205m a year. It has been deemed by many as a lifeline in otherwise dire financial circumstances.

What is Changing?

From April 2018, the Support for Mortgage Interest benefit will be replaced by a new ‘second mortgage’. This government scheme will loan people the money they need, which is secured against the property with the intention of being repaid at a later date.

Interest is added monthly, so the longer the loan is held, the more interest will be needed to be paid back. This could mean debts of thousands of pounds. However, the mortgage will not have to be repaid until the property is sold or transferred to another person. Voluntary payments to reduce the total are recommended though.

How Have the Changes Been Received?


There has been considerable criticism of this scheme in the UK press. As, with an ageing population, more and more carers will be needed in future, and a greater number of people are likely to be disrupted as a result. This could restrict finances further and limit their ability to move should they want or need to.

A few weeks ago, The Observer revealed that just 6,850 of the 124,000 thousand households that currently receive the SMI benefit have signed up for the new scheme. This could because they are disgruntled, or simply because they haven’t been made aware of the developments. It is essential that everyone is made aware of these changes to prevent arrears occurring when the benefit ends this April.

The Department for Work and Pensions recently told The Guardian:
“Support for mortgage interest is being reformed so a safety net is still in place to protect homeowners from repossession when they need it, and to make it fair to the taxpayer who funds it. We are contacting claimants in enough time for them to reach a decision and signposting them to independent advice.”

“Over time, someone’s house is likely to increase in value, so it’s reasonable that anyone who has received financial help towards their mortgage should be asked to pay that back if there is available equity when the property is sold.”

Get Help Assessing Your Mortgage Options

If you need help analysing your residential mortgage options and loan-ability in order to make an informed decision about the support for mortgage interest benefit changes, please contact our friendly team.

Article By Chris Evans

February 21st, 2018

Chris heads up the specialist mortgage team which encompasses first charge mortgages, buy-to-let finance and second charge loans.

Chris has spent the last 17 years gaining experience in mortgages, protection and secured loans with roles at Legal & General, Nemo and Mortgage advice bureau giving him a broad understanding of the property finance markets.

Having Joined the Pure Group in 2017 he has worked with Ben to establish and grow the 1st and 2nd charge proposition exponentially in a short period of time. Chris has overseen the recruitment and development of an extremely experienced team of employed and self employed advisers that continues to deliver year on year growth.

See more articles by Chris

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