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Mortgages: Government Assistance

Volume 490: debated on Monday 30 March 2009

To ask the Secretary of State for Work and Pensions (1) what level of assistance his Department provided for vulnerable households under the support for mortgage interest scheme in the period immediately prior to 5 January 2009; and what level has been provided under the scheme since that date; (266307)

(2) what definition of vulnerable his Department uses in respect of its support for mortgage interest scheme.

Help is provided towards the interest on mortgages (known as support for mortgage interest (SMI)) as part of income support (IS), income-based jobseeker’s allowance (JSA(IB)), income-related employment and support allowance (ESA(IR)) and state pension credit (SPC).

Prior to 5 January, home owners claiming IS, JSA(IB), ESA(IR) generally had to serve a waiting period of 39 weeks before assistance was provided towards their eligible housing costs. Customers in receipt of state pension credit (SPC) receive help immediately with their housing costs as they do not serve a waiting period.

Some home owners, who were considered to be vulnerable, received help towards their housing costs earlier than 39 weeks. Help for these groups was provided at 50 per cent. of eligible mortgage interest after eight weeks then full eligible assistance after 26 weeks. The groups were: carers; widow(er)s or people who have been abandoned by their partner and who had responsibility for the care of a child; prisoners detained in custody pending trial or sentence upon conviction; and those who had been refused payments under an insurance policy due to either a pre-existing medical condition or because they were infected by HIV or AIDs.

From 5 January 2009, all working age customers (those claiming IS, JSA(IB) or ESA(IR)) making new claims will receive help with 100 per cent. of their eligible housing costs after a waiting period of 13 weeks.

This compares favourably with the previous position because although some customers received 50 per cent. of eligible housing costs after eight weeks under the old rules, they had to wait 26 weeks before receiving 100 per cent. We believe that this more generous help, taken together with the increased capital limit for working age customers from £100,000 to £200,000, will reduce the risk of repossessions.

To ask the Secretary of State for Work and Pensions what the (a) maximum amount which could be claimed and (b) time limit for claims under the support for mortgage interest scheme was in the period up to 5 January 2009; and what the limit has been since that date. (266309)

Where a home owner is getting income support (IS), income-based jobseeker’s Allowance (JSA(IB)), income-related employment and support allowance (ESA(IR)) or state pension credit (SPC) and they have a mortgage, those benefits may include an additional element called support for mortgage interest (SMI). SMI is meant to assist the home owner with the interest on their mortgage, and an additional amount is included in the applicable amount. It is not a separate benefit, rather an integral part of IS, JSA(IB), ESA(IR) and SPC.

The amount of SMI is calculated by applying a standard interest rate (SIR) to the capital outstanding on the mortgage, subject to upper limits on the amount of that capital. From 5 January, for new claims to IS, JSA and ESA, the capital limit was increased from £100,000 to £200,000. The existing £100,000 capital limit has been retained in SPC, but we will allow those getting help via SMI on loans over £100,000 to keep the higher capital limit when they move on to SPC within 12 weeks of a claim for a working age benefit ending, for as long as they remain entitled to SPC.

Previously, the SIR had been set at the Bank of England base rate plus an additional 1.58 per cent. However, the Government are concerned that recent cuts in the base rate will disadvantage significant number of customers on benefit if they are reflected in SMI calculations. For this reason, the Chancellor announced in the pre-Budget report on 24 November 2008 that the SIR will remain at 6.08 per cent. for six months.

In addition, the waiting period before help through SMI starts was shortened from 39 or 26 weeks to 13 weeks for new, some repeat and some existing working age claims. There is no waiting period for home owners claiming SPC.

A two-year time limit on SMI for new, some repeat and some existing JSA claims only was introduced from 5 January 2009. Prior to this, help through SMI was available so long as there was a liability for the mortgage and so long as there was entitlement to JSA.

The SMI changes are a temporary short-term measure intended to help people over the potentially difficult labour market problems they face and help limit repossessions, rather than changing existing qualifying conditions, and will be reviewed once housing market conditions are more favourable.