Support for Mortgage Interest Changes

dmg24

I don't want this to get lost in the general debate, so thought it deserved its own thread.

From the full Budget report:

1.112

The rate at which Support for Mortgage Interest (SMI) is paid is set at 1.58 percentage points above the Bank of England Base rate, and it has been frozen at 6.08 per cent since late 2008 although interest rates have fallen significantly. To put SMI on a more sustainable footing and to better reflect mortgage costs, SMI will be paid at the level of the Bank of England’s published Average Mortgage Rate from October 2010.

I'll do a little research to find out what this rate currently is.

dmg24

I can only find the figures up to August 2009, but at that point the figure was 4.34%. In the preceding six months, the figure varied between 4.08 and 4.34%.

I am off out now, but will try to find some more up to date figures when I get back.

anmarj

thanks for that, we were not aware of that, can't wait for the phone calls on that one

Shakethedisease

I read this on the Shelter Scotland site ( in their response to the budget) :-

In response to today’s budget announcement that Support for Mortgage Interest (SMI) will be paid at the same rate as the Bank of England monthly rate, Gordon MacRae, Head of Communications and Policy, Shelter Scotland, the housing and homelessness charity, said:

“This is not good news for those struggling homeowners who are just about managing to keep a roof over their head thanks to the support they are getting through SMI, not to mention the thousands of homeowners who will potentially need help in the coming months.

“Support for Mortgage Interest has been one of the key schemes in helping hold back the rising tide of repossessions. But the reality is that most people on SMI are on higher than average interest rates, so there is a real danger it will no longer help the people who need it most and could trigger a surge in repossessions.

“Introducing a system where rates will change monthly will create additional uncertainty for thousands of people already struggling day to day. The only solution is to ensure that SMI is paid at the rate of interest that people are currently being charged.”

Are they saying the rate will change monthly ??

dmg24

Shakethedisease wrote: »

I read this on the Shelter Scotland site ( in their response to the budget) :-



Are they saying the rate will change monthly ??

The Budget report does not say, but the rate is assessed monthly. I would also agree with the comments of Shelter, those on benefits are much more likely to be on higher interest rates as they are a higher risk, so the 'average' rate to be used is not really a fair representation.

tcr_3

dmg24 wrote: »

The Budget report does not say, but the rate is assessed monthly. I would also agree with the comments of Shelter, those on benefits are much more likely to be on higher interest rates as they are a higher risk, so the 'average' rate to be used is not really a fair representation.

Good find.

I disagree a bit with Shelter. Jobcentre Plus isn't resourced to re-assess its entire mortgage casework once a month. Nor can it possibly revert to a system of paying interest at the customer's own interest rate ... the staff for that just don't exist (that was tried before and abandoned due to its administrative complexity).

But I agree with you (and Shelter), many people on the mortgage direct scheme will be disadvantaged by this change, the ones who didn't borrow from a mainstream lender. And those lenders are also amongst the worst when it comes to imposing punitive penalty charges for late payment etc.

This change will prove "difficult" for many people.

mitchaa

If this was changed tomorrow, what were people getting today and what would they get tomorrow?

Does this result in a rate drop?

I thought it was based around the BOE BR + x% ?

anmarj

mitchaa wrote: »

If this was changed tomorrow, what were people getting today and what would they get tomorrow?

Does this result in a rate drop?

I thought it was based around the BOE BR + x% ?

the normal rule for working out the smi was boe br + 1.5%, dwp following 6 weeks later, when the base rate went right down to november 08 (i think) it cause a lot of trouble so in the november budget it was announce that they would stick to 6.08% for a period of time (initally 6 months but would be reviewed) it then continues to be 6.08% at the present time. there will be a lot of pensioners who will end up falling of the GC element of PC due to this as well, and it will cause a lot of confusion if the rate changed every month as one month they could be on GC the next not.

mumofjusttwo

So does anyone know what the rate would be if they were to use the current rates.

I have a high interest rate on my mortgage and SMI is a great help to me keeping the house.

If I lose the house they they would be paying a lot more on HB.(I think)

dmg24

anmarj wrote: »

the normal rule for working out the smi was boe br + 1.5%, dwp following 6 weeks later, when the base rate went right down to november 08 (i think) it cause a lot of trouble so in the november budget it was announce that they would stick to 6.08% for a period of time (initally 6 months but would be reviewed) it then continues to be 6.08% at the present time. there will be a lot of pensioners who will end up falling of the GC element of PC due to this as well, and it will cause a lot of confusion if the rate changed every month as one month they could be on GC the next not.

Yep, and those who work part time and claim IB JSA or IS are going to hit the same problem. You then have the knock on effect of IS/ PC etc being a passport to other entitlements. What happens to a claimant who innocently ticks that they are entitled to free prescriptions/ full CTB, only to find that they are not for that month?

I would love to say that the situation will be resolved before October, but I doubt it very much!

dmg24

mumofjusttwo wrote: »

So does anyone know what the rate would be if they were to use the current rates.

I have a high interest rate on my mortgage and SMI is a great help to me keeping the house.

If I lose the house they they would be paying a lot more on HB.(I think)

The last figure I could find was 4.34%, but that is nearly a year old. If anything I would guess that rates are marginally lower since then.