The Loans for Mortgage Interest (Amendment) Regulations 2023 came into effect on 3 April 2023. These regulations change some of the rules for claiming Support for Mortgage Interest (SMI).
The government hopes these changes will make it easier for borrowers to get help through SMI during the cost of living crisis. But the Department for Work and Pensions recently estimated that the changes would only lead to an extra 900 families applying for the loan.
What is Support for Mortgage Interest (SMI)?
SMI is a loan that certain borrowers can apply for. It helps with the interest part of their mortgage or secured loan.
Borrowers can apply for SMI if they are a homeowner and get one of the following benefits:
- income-related Employment and Support Allowance (ESA)
- income-related Jobseeker's Allowance (JSA)
- Income Support
- Pension Credit
- Universal Credit
SMI is a loan and has to be paid back with interest. The loan does not have to be paid back until the property is sold or transferred.
Waiting times for SMI are shorter
The waiting periods for SMI have been reduced from 39 weeks to 13 weeks for Universal Credit claimants. This means that borrowers who receive Universal Credit can apply for SMI 13 weeks after claiming it.
Borrowers claiming legacy benefits still need to wait for 39 weeks before they can apply for SMI.
If a borrower stops claiming Universal Credit, they will not need to wait another 13 weeks if they return to it within six months.
If they stop claiming legacy benefits, they will not need to wait another 13 weeks if they return to them within 52 weeks.
There are also new rules for mixed age couples. This means couples where one person has reached State Pension age and the other is not.
Mixed age couples may not have to wait 13 weeks to claim SMI if they claim Universal Credit. This will depend on whether they were eligible for SMI before moving to Universal Credit.
Universal Credit earned income rules have changed
From 3 April 2023, a Universal Credit claimant who has earned income may qualify for help with interest payments through SMI.
Previously, Universal Credit claimants did not qualify for SMI if they or their partner had any earned income, even if this earned income was very low.
Changes to SMI interest rates
There have been changes to SMI interest rates outside of the new SMI regulations.
Interest is applied to SMI loans. On 1 January 2023 the interest charged on the loan increased to 3.03%. This interest rate is based on the Office for Budget Responsibility forecast market guilt rate.
SMI is paid at an interest rate based on the Bank of England average mortgage rate. The rate of the loan payment changes when the Bank of England average mortgage rate goes up or down by more than 5%.
An increase to the rate paid by SMI was triggered on 29 March 2023. The rate increased from 2.09% to 2.65% and will be put in place on 10 May 2023.
For advice on these changes, contact our helpline:
- by phone on 028 9024 5640, or
- chat online to one of our advisers