bbc.co.uk, cml.org.uk (image courtesy of totallymoney.com)
The Support for Mortgage Interest (SMI) scheme, which currently helps some struggling homeowners to pay their mortgage, is being reviewed. At £400m per year, the Government has stated that the scheme is unsustainable and must be reformed. Some people on benefits are eligible for the scheme and can receive payments 13 weeks after losing their job – a timescale previously cut from 39 weeks, for a period of two years.
In this year’s budget, Chancellor George Osborne said that the scheme would be in place until at least January 2013, but now Lord Feud, the minister for welfare reform, has launched a review of the scheme. “We are committed to supporting homeowners to stay in their own homes when times are hard, but in the future, this type of support must be fair and affordable,” he said.
Changes in the scheme could see charges put on the homes of those being supported by the scheme, which would then be recovered when the house is sold. This proposal has been welcomed by bodies representing lenders, such as the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA), but two other proposals have not been as well received. The first is a plan to pay the benefit direct to the claimant, rather than the lender, and to put the eligibility timescale back up to 39 weeks.
Autumn Dip for Mortgage Lending
Mortgage lending fell by 8% in October, compared to the previous month of September. The statistic came from the CML, who said that 44,500 loans for home purchase were advanced in the month. Loans to first-time buyers fell by 10%, and those who were able to buy had to stump up an average deposit of 20%.
Mortgage lending has been subdued throughout the year but the CML believes that the end of stamp duty exemption for first-time buyers will kick lending into life in the spring. At the moment, first-time buyers are exempt from the 1% stamp duty payment when purchasing a house priced below £250,000, but the Government are set to scrap the scheme in March, saying it has been “ineffective.”