One key element of Chancellor of the Exchequer Jeremy Hunt’s Autumn Statement last week has gone under the radar – a modification of the government’s existing Support for Mortgage Interest scheme for Universal Credit (UC) claimants.
Contained in paragraph 5.16 of the publication of the Chancellor’s Autumn Statement is a note on “reforming support for mortgage interest”, which announces the following policy:
“To support mortgage borrowers with rising interest rates, the government will allow those on UC to apply for a loan to help with interest repayments after three months, instead of nine. The government will also abolish the zero earnings rule to allow claimants to continue receiving support while in work and on UC. This will come into effect in Spring 2023.”
Though significant, this policy was not announced to the House of Commons during Hunt’s statement.
As of May 2022, some 23,764 people are recipients of the loan from the government to people on UC to cover the interest payments alone on their mortgage.
Prior to the Autumn Statement, beneficiaries had to have been on UC for nine months before accessing the loan. This has now been reduced to three.
There was also a zero earnings rule – if one were earning anything at all, they did not qualify for the loan. This has now been abolished.
The loan must be repaid with interest if the claimant sells or transfers ownership of their home – not while benefitting from the loan on their current home. If the home is sold and another is bought, the loan transfers to the new property and does not need to be repaid.
The Department for Work & Pensions says beneficiaries of the loan will never be asked to sell their home in order to repay it.
When they do sell their home, they will repay it from what’s left after they’ve repaid their mortgage, any home improvement loans, and any other loans secured against the home. If they do not have enough left, they will have to pay back what they can. The rest of the loan will be written off.
While unlikely to have a tangible impact on house prices over 2023, there is every chance that this policy could have a real impact insofar as preventing repossessions for those who are struggling to cover their mortgage payments.
See the Chancellor’s full Autumn Statement publication here.
