Call for support for struggling homeowners as furlough ends

20th September 2021

UK Finance and the Building Societies Association are calling for important changes to be made to the Support for Mortgage Interest (SMI) scheme to help struggling homeowners as the furlough scheme draws to a close.

SMI is a government loan scheme that helps homeowners who are in receipt of benefits1, but as it stands, they must wait 39 weeks to claim, during which time their financial situation may become so difficult that they are unable to remain in their home.

The government’s furlough scheme, alongside other support measures, has protected millions of people from significant financial difficulties during the pandemic. However, furlough is just two weeks away from closing so we are calling for two key changes from the government.

Firstly to reduce the wait time for accessing SMI from 39 weeks to 13 weeks, to make sure help is given when people need it most and also to allow people on Universal Credit to claim SMI if they are working on reduced hours.

UK Finance says that SMI is a loan and not a benefit, meaning these changes will have a very limited impact on the government purse, but will have a huge impact on the households that will benefit.

Mortgage lenders have provided over 2.9 million mortgage payment deferrals to help homeowners during the pandemic. However, whilst lenders will continue to support those still struggling, some homeowners will also benefit from SMI.

Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said “With the end of the furlough scheme only days away, there is a likelihood that unemployment will rise. Without urgent modification of the SMI scheme the risk of home repossession could become a reality for many despite the best efforts of lenders.”

“Without the reforms, we expect more government funding will be required for the provision of housing benefits for former homeowners who were unable to get the financial support they needed, when they needed it.”

Charles Roe, Director of Mortgages at UK Finance said “The current wait time and eligibility criteria for SMI is preventing much-needed help going to struggling homeowners before their mortgage arrears start building up. As the furlough scheme comes to a close, we may see more people needing to use SMI. UK Finance and the BSA are calling on the government to urgently review the scheme’s eligibility criteria and reduce the existing wait time of over nine months.”

Jane Tully, director of external affairs and partnerships at the Money Advice Trust, the charity that runs National Debtline, said “With furlough ending on 1 October and with many people facing the risk of unemployment and reduced hours, accessing support through Universal Credit and Support for Mortgage Interest will be crucial.”

“However, for homeowners struggling to meet mortgage payments, the 39 week wait for help from SMI, risks the build-up of arrears and potential home repossession.”

“Mortgage borrowers caught at the sharp end of the impact of Covid, need the Government to act now by reducing the wait for SMI to 13 weeks and changing the earnings rules under Universal Credit to ensure they can access the vital support they need.”