A new paper from the think tank points out that while a third of those in poverty are owner-occupiers, there is little support available for this group through the benefits system. It is calling for an improved version of the Support for Mortgage Interest scheme to be introduced.
The Centre for Policy Studies warns that millions of people could face losing their jobs when the furlough scheme ends next month. As mortgage payment holiday arrangements end at the same time, many will risk losing their homes as well.
Even with the Jobs Support Scheme, many could struggle to pay their mortgages without reform to the support available.
Housing benefit is only available to renters – homeowners must wait nine months to qualify for help with their mortgage interest payments.
The report, supported by the Joseph Rowntree Foundation, argues that the Support for Mortgage Interest (SMI) scheme needs urgent reform to support low income homeowners through the crisis, and to improve the benefits system so that it better supports struggling homeowners.
It argues that as well as being necessary and compassionate, such measures will be far more cost-effective for government than seeing people lose their homes and go on to housing benefit.
To ensure those with mortgages who lose their jobs don’t also lose their homes, the CPS is proposing that:
- the nine-month waiting period for SMI should be abolished
- the first three months of SMI should be paid as a grant, not a loan
- the government should allow people to claim SMI while working, as with other benefits
- lenders should make people who are at risk of losing their homes aware of the scheme automatically
- SMI should be time-limited for claimants who are able to work and are not receiving a disability-related benefit
James Heywood, CPS head of welfare and opportunities, says: “The Support for Mortgage Interest Scheme is going to be vital for ensuring people losing their jobs do not also lose their homes before they manage to get back to work. The government needs to act now to make the necessary changes so people can move straight onto SMI when their mortgage holiday runs out or when they become unemployed.
“If they don’t, not only will people be forced out of home ownership into the rented sector, it will also cost the state more to support them through housing benefit.”
Darren Baxter, policy and partnerships manager at the Joseph Rowntree Foundation, says: “Even before coronavirus hit, a third of homeowners were living in poverty. And as the economic fallout from the pandemic grows, that number is likely to rise. With the deadline for applying for a mortgage holiday rapidly approaching, now is the time for government to take swift action.
“Reforming the Support for Mortgage Interest scheme is a targeted and cost-effective way of preventing struggling homeowners from being pulled further into poverty. This crisis has shone a spotlight on just how important a safe, secure and stable home is. The government’s focus must be on ensuring people can stay in their homes, whether they be homeowners or renters.”