The amount support for mortgage interest covers is based on a standard interest rate set by the government, not your lender’s rate. Currently, this rate is 3.9%, but it can go up or down over time. While it might not cover the full amount of interest charged by your lender, it’s a significant contribution that can make the difference between keeping or losing your home.
Spiralling interest and mortgage rates have hammered mortgage holders across the UK since the Covid-19 pandemic. Those who built detailed budget plans with the help of Citizens Advice went from being “one of the most protected groups to facing a negative budget”, the organisation said, with many being left without enough cash to cover essentials like food and energy bills.
The average mortgage holder supported by Citizens Advice had £61 left over in their budget after covering essentials in 2019 – but by 2023, they faced an average £147 per month shortfall. That number, according to Citizens Advice, increased to £182 for single parents and £276 for people of colour. And the number of mortgage holders being referred to food banks and getting emergency grants via Citizens Advice increased by 177% between 2020 and 2023.
“People who can’t cover their essential bills risk being sucked into a spiral of debt,” said Dame Clare Moriarty, chief executive of the organisation.
The data is “a sobering reminder that, despite cutting their spending back to the absolute minimum, too many people are simply living on empty,” she added.
“The government must look at ways of preventing mortgage holders and renters from falling further into the abyss.”
Can I claim support for mortgage interest?
Not everyone qualifies for SMI. To be eligible, you have to be a homeowner receiving a means-tested benefit. That includes universal credit, income support, income-based jobseeker’s allowance (JSA), income-related employment and support allowance (JSA) and pension credit.
Eligibility also depends on how long you’ve been claiming the qualifying benefits. You usually need to have been on them for at least 39 consecutive weeks, roughly nine months, or three months if you’re claiming universal credit.
This doesn’t apply if you’re receiving pension credit, in which case you can apply for SMI immediately, so it is a little easier for older homeowners to access help.
Many of these benefits also make you eligible to apply for a budgeting loan, which can help cover one-off costs. And if you’re not receiving welfare payments but think you need the help of a support for mortgage interest payment, you should check which benefits you might be entitled to.
Support for mortgage interest is only available for mortgages on your main home, meaning you can’t claim it for second homes or buy-to-let properties. The loan also won’t help with arrears or missed payments you’ve already accumulated because it only applies to ongoing interest.
It’s important to think carefully before applying even if you meet the eligibility criteria. Because SMI is a loan, it will need to be repaid.
Repaying a support for mortgage interest loan
One of the most important things to understand about SMI is that it’s a loan, not a handout. This means you’ll need to repay it at some point, along with the interest accrued. Repayment usually happens when you sell your home or transfer ownership of it. And because the loan accrues interest, the amount you owe will grow over time – though it’s still a cheaper way to borrow money than a lot of other options.
When you sell your home, the repayment is taken from what’s left after you’ve paid off your mortgage and any other relevant loans you secured before getting the SMI loan. This means that if your home has gone up in value significantly, the repayment might not make much of a dent in your finances. But if it hasn’t gained much value – or has decreased in value – you could be left out of pocket.
The government will not expect you to sell your home in order to pay it back.
You can choose to repay the loan early if your circumstances improve, but this isn’t a requirement. Some people prefer to clear the debt as soon as they can, but others are comfortable leaving it to be repaid when they sell their home.
The government should give you clear statements outlining how much you owe so you can track the growth of your loan over time. It’s important to pay attention to those so you can plan for your future finances.
If you die before you’ve paid off the loan and leave your home to a partner, it won’t need to be repaid, but the government will expect the loan to be repaid if the home is sold or left to anyone else.
Where to get help or advice
Like with a lot of government financial support, navigating the system can be daunting. If you’re considering applying for support for mortgage interest, or you want more information tailored to your circumstances, there are plenty of resources available to help you make an informed decision.
It’s a good starting point to contact support organisations like Citizens Advice for free guidance. They can help you understand your rights, weigh up your options and help with budgeting or negotiating with your lender. Or, if you can afford it, speak to a financial adviser.
Jobcentre Plus and the Pension Service can give you information if you’re already claiming a qualifying benefit. They can explain the application process, eligibility requirements and what SMI might look like in your specific situation.
Shelter’s helpline and online resources are particularly useful for anyone at risk of losing their home.
If you’re struggling with wider financial issues, debt charities like StepChange or National Debtline can help. They offer practical support for managing debt and budgeting, as well as advice on how support for mortgage interest could fit into a broader financial plan for you.
It’s also a good idea to speak to your mortgage lender. Many are open to negotiating alternative arrangements, like temporary payment holidays or reduced payments, which could ease some of the pressure on you for a short time without the need for a government loan.
Make sure you fully understand the terms of the loan if you decide to go ahead with a support for mortgage interest application. Pay attention to how much you’ll receive, how the interest works and what your repayment is likely to look like in the future.
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