A new paper from a think tank warns that many low income owner occupiers risk losing their homes when the mortgage holiday arrangements end.
Even with the Job Support Scheme replacing the furlough system, many could struggle to pay mortgages without reform to the support available, claims the Centre for Policy Studies.
Despite a third of those in poverty being owner-occupiers, housing benefit only covers renters. Owners can only get help with their mortgage interest payments, and even then must wait nine months to qualify - and the whole amount is withdrawn if they take on any work at all.
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 rest of the crisis, and more generally 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 homes and go on to housing benefit.
The CPS says this is because the current version of the mortgage holiday is a loan-based scheme with virtually no ultimate cost to government.
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;
- government should allow people to claim SMI while moving into work, as with other benefits;
- lenders should make people who are at risk of losing their homes aware of this scheme automatically;
- to ensure that people do not remain in homes they cannot afford in the long term, SMI should be time-limited for claimants who are able to work and are not receiving a disability-related benefit.
The report also argues that there is a longer-term need to rebalance the welfare system to reflect the desire of those on low or moderate incomes to achieve, and retain, home ownership.
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.”