Parliamentary Under-Secretary of State for Work and Pensions Mims Davies was asked whether she would consider the potential merits of the SMI mirroring real-time changes in the Bank of England’s monthly average mortgage interest rate.
Davies said that while SMI is kept “under review”, especially when markets are volatile, there were “no plans to amend this policy”.
“No assessment has been made of the financial impact on recipients of changing the standard interest rate before the trigger point,” she added.
Davies said the “primary purpose” of SMI is to “provide owner-occupiers receiving an income-related benefit with a level of support that is sufficient to protect them from the threat of repossession”.
“Lenders recognise that the payments we make will not always mirror the mortgage-holders liability, but we expect that they will, nonetheless, exercise forbearance.”
Davies continued that the latest figures from Bank of England at the end of January showed that the average mortgage rate stood at 2.51 per cent.
“The rate at which SMI is paid changes only when the Bank of England average varies from the rate in payment by 0.5 per cent or more. Through guidance from the Financial Conduct Authority, lenders are aware that a change to the rate of SMI payments is triggered only in these circumstances and so should continue to offer tailored forbearance to their customers,” she added.
‘No assessment’ on rising mortgage repayments for SMI receipts
Davies was also asked whether an estimate had been made of the number of Universal Credit claimants that have been made homeless due to increase in rates of mortgage interest.
“There has been no assessment on the impact of rising mortgage repayments for those claimants who are in receipt of SMI. Therefore, there has been no estimate made on the number of Universal Credit claimants who have been made homeless due to increases in mortgage interest rates,” she noted.
The latest figures from the government showed that in the last quarter around 12,444 SMI loans were in payment.
In the Autumn Statement last year, Chancellor Jeremy Hunt said that the wait period for SMI would be lowered from nine to three months.
