2018 changes for mortgage interest support


The government’s Support for Mortgage Interest (SMI) scheme will be undergoing a major overhaul next year. The current scheme entitles current applicants government relief from mortgage interest for people who are claiming Universal Credit, Income Support, Jobseeker’s Allowance and Pension Credit. About half of these claimants, it is reported by The Telegraph are elderly pensioners.

The structure of the current payment scheme gives relief on up to £200,000 of the mortgage or loan if the claimant is on any of the income support benefits. If the claimant is on the government’s Pension Credit this loan amount coverage support is limited to £100,000. The key point in the government’s SMI scheme is that this relief does not need to be repaid. This detail however will change on the 5th of April next year.

The relief offered from next year will take the form of a government loan that will not only have to be repaid, but will incur interest charges. Effectively the SMI scheme will become a government loan on a loan, that will need to be be repaid when the owner(s) die or the property is sold off. In the case where the equity on the property is incapable of covering the loan, the SMI debt will be written off.

The Telegraph also reports that people under the current scheme will be notified of the changes in February of next year. Those most impacted by the incoming changes will likely to be those pensioners who may have taken out interest rate mortgages, as the new scheme structure is an excess of interest from a second loan. The change will likely challenge some people’s perception that a house is an asset that can be passed down to later generations. The changes reflect a realisation that British debt is unfortunately going to grow and grow, in more ways than one.