According to figures obtained by Royal London following a freedom of information (FOI) request, just 1,030 homeowners made new claims for support for mortgage interest (SMI) between April 2018 and July 2019.
This was less than a third of the total 3,580 who were eligible for support during the period, as the benefit has been replaced with a loan that has to be repaid by the claimant.
Less than two years ago, an estimated 100,000 unemployed, sick or elderly homeowners could claim help towards their mortgage interest costs from the government. The most recent official figures showed this fell dramatically to 20,000 following the introduction of the changes.
Becky O’Connor, personal finance specialist at Royal London, said: “In less than two years, the government has effectively dismantled part of the welfare state.
“The low interest rate environment may mean that the government has been able to make the changes without too much short-term impact, but without this support, any kind of strain on mortgage affordability, from losing a job or going off sick, may mean that thousands of homeowners find themselves on the fast track to repossession.”
Prior to April last year, SMI was paid as a free benefit covering the interest on mortgages for those claiming benefits such as pensions credit, income support and Universal Credit.
After April 2018, the government introduced a rule that the benefit would be paid as a loan and would need to be settled when the property was sold or transferred into new ownership, including for existing claimants.
Last year, Royal London warned that government plans to replace benefits paid to help people pay their mortgage interest with repayable loans could cause significant hardship for the most vulnerable in society.
A Department for Work and Pensions (DWP) spokesperson said: “The support for mortgage interest (SMI) loan provides robust protection against repossession for everyone eligible in times of need, while ensuring fairness for the taxpayer who funds it.
“Everyone who was in receipt of the SMI benefit was offered the option to take up the SMI loan, and neither claimants nor mortgage lenders will see any difference in the payments they receive.”