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SMI recorded as an AR/Arrangement on credit file?

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Hi,

I’m wondering if anyone else has experienced problems with Support for Mortgage Interest/SMI being recorded by lenders as monthly AR entries on their credit file? I have just started receiving SMI and today discovered with horror that my building society will record this as an arrangement on my file. I’m shocked by this as they will still be receiving my mortgage payment in full each month; all the DWP information states that SMI wont affect your credit rating.

Has anyone else experienced this? I’m devastated, honestly, and on the verge of deciding to cancel the SMI. That would make budgeting extremely difficult, but anything seems better than months and months of AR entries on my credit file (I am aware that many lenders treat these like defaults).

Thanks so much for any info/advice x
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Comments

  • boo_star
    boo_star Posts: 3,202 Forumite
    Part of the Furniture 1,000 Posts
    As you say it'll pay the full mortgage amount then your mortgage is interest only?
  • Gaz83
    Gaz83 Posts: 4,047 Forumite
    1,000 Posts Combo Breaker
    Is your mortgage an interest-only mortgage, or is it an repayment mortgage?
    "Facism arrives as your friend. It will restore your honour, make you feel proud, protect your house, give you a job, clean up the neighbourhood, remind you of how great you once were, clear out the venal and the corrupt, remove anything you feel is unlike you... [it] doesn't walk in saying, "our programme means militias, mass imprisonments, transportations, war and persecution."
  • My mortgage is a repayment mortgage - the government SMI payment will cover about 1/3 of the monthly payment. I will be paying the rest myself directly - the building society know this. I will remain on the same mortgage product and they will receive exactly the same amount of money each month, by the same payment date. I have a completely unblemished payment history with them dating back over six and a half years.
  • I’ve spoken to the DWP about this and they were very surprised, but it’s obviously not something they have direct control over.
  • boo_star
    boo_star Posts: 3,202 Forumite
    Part of the Furniture 1,000 Posts
    rubypercy wrote: »
    I’ve spoken to the DWP about this and they were very surprised, but it’s obviously not something they have direct control over.

    Have you been paying the repayments yourself until the SMI kicked in?

    I seem to recall that SMI usually takes a while to kick in and as such the mortgage will technically end up in arrears.

    Obviously if you've been making up the repayments in the meantime you won't have gone into arrears.
  • Yes, I’ve made every monthly mortgage payment in full and on time - both during the 39 week wait for my SMI entitlement time kick in, and for the five months (!) it took for the DWP to process my SMI application, get all the forms signed and witnessed etc. It has been a horrible struggle but I managed it.

    In fact, I’ve actually overpaid by £1,200 this year, because the DWP sent the June-Dec SMI arrears directly to my building society, rather than to me.
  • boo_star
    boo_star Posts: 3,202 Forumite
    Part of the Furniture 1,000 Posts
    I thought SMI was paid to the mortgage provider? Which is potentially why the bank are viewing this as an AP, technically your repayment amount will have been dropped in order for the SMI payment to cover it, if that makes sense.
  • It is incredibly upsetting/frustrating, because the lender isn’t actually being disadvantaged by this in any way, as far as I can see. And I had no idea it was even a possibility, because all the government/benefits advice websites claim that SMI won’t affect your credit history.
  • Sorry, I think I’m not being clear - will try and explain it another way!

    My mortgage is £480 a month. SMI will cover about £220 of that; I will be paying the shortfall myself.

    Each month the lender will receive the following:

    £220 direct from the DWP
    £260 from me

    So the lender receives £480 each month as expected. Yet they want to record it on my file as an arrangement
  • boo_star
    boo_star Posts: 3,202 Forumite
    Part of the Furniture 1,000 Posts
    edited 20 December 2019 at 3:37PM
    rubypercy wrote: »
    Sorry, I think I’m not being clear - will try and explain it another way!

    My mortgage is £480 a month. SMI will cover about £220 of that; I will be paying the shortfall myself.

    Each month the lender will receive the following:

    £220 direct from the DWP
    £260 from me

    So the lender receives £480 each month as expected. Yet they want to record it on my file as an arrangement

    But is your contribution a manual payment with the SMI being paid direct from the government being viewed as the monthly repayment?

    That may be why they're viewing it as an AP as they've technically agreed to a lower repayment so they have made an "arrangement" with you. That you're overpaying to bring it up to your contractual agreements technically doesn't matter, although it is a bit harsh.

    If the money is being paid to you and the bank is still taking its full monthly repayment directly from you I don't see how they can justify an AP marker. The fact that some of the money has come from the government seems irrelevant if the full monthly payment is still being debited from your account.
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