The current rate of interest used to calculate Support for Mortgage Interest (SMI) is 3.63% and has remained at this level since October 2010 when it was cut from 6.08% to reflect the fall in the Bank of England’s published Average Mortgage Rate.
The published Average Mortgage Rate fell to 3.12% in April this year, and from 6 July DWP will follow suit and drop its SMI rate to match this.
A DWP spokesperson said: “It makes sense that the mortgage interest support we pay is tied to the Bank of England’s Average Mortgage Rate and that it should change as that rate changes.
“Mortgage support is not designed to cover an individual’s entire mortgage interest payment, but instead offers a measure of support for some people to prevent repossessions.”
Payments are made to borrowers in financial difficulty and should only be attributed to the interest payment of the mortgage. In rare circumstances when there is an excess in SMI, it must first be used to pay down any mortgage arrears before any amount can be used to pay off the capital balance.
The payment is made directly to the mortgage lender.
To qualify for the payments borrowers must be in receipt of either Income Support, Jobseeker’s Allowance, Employment and Support Allowance or Pension Credit.
Information on SMI payments can be found on the government’s website.
Further reading on the SMI payment can be found on the Council of Mortgage Lenders’ website.