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Labour urges rethink on mortgage benefits

Labour has warned that vulnerable people may struggle to pay their mortgages because of benefit changes.

About 90,000 people on certain benefits claim support for mortgage interest (SMI) but from Friday the benefit will be replaced by government loans.

Figures suggest 27,000 SMI recipients – 51% of those contacted – say they will not take up the loan.

Labour says there is a risk elderly people may cut back on essentials like heating rather than take the loan.

The new state-backed loan, secured against the mortgaged property with interest added each month, would not have to be repaid until the property is sold or transferred to someone else.

‘Halt this change’

The government says it is reasonable to ask someone who has received help towards their mortgage to repay it, as their home is likely to increase in value.

But shadow work and pensions secretary Margaret Greenwood said: “Even at this late stage, the government could and should think again and halt this change.”

She added: “It is worrying that the government seems determined to push ahead with this change despite the risk of it causing real hardship for people on low incomes.

“Many of the people who claim SMI are elderly or disabled, and it is extremely concerning that pensioners might try to cope without the loan by cutting back on essentials like heating.”

The government is set to spend about £161m on SMI in the year 2017-18. As of 21 March, they had successfully contacted 54,000 people by telephone and tried to contact a further 31,000, as a follow-up to a letter explaining the change.

Of those contacted, 51% – about 27,000 people – had said they intended to decline the offer of a loan, 13,000 said they would accept it and 14,000 said they were undecided.

A Department for Work and Pensions spokesman said: “People who sign up to the loan will continue to get help with their mortgage interest and it is only repayable if there is available equity when the property is sold.

“If people decide to decline the loan now but change their mind in future the loan can be backdated so, in effect, there would be no break in payments.

“We have already contacted everyone currently in receipt of SMI to explain the change but we are making sure people have time to review the documents, obtain advice and consider their options.”

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