Government accused of 'cack-handed' reforms over mortgage help scheme

Ministers have been accused of "another cack-handed benefit change" as new figures showed thousands of people had not been successfully contacted about a change to their mortgage payments.

The Department for Work and Pensions (DWP) said it has yet to successfully contact 29,000 claimants of support for mortgage interest (SMI) by telephone, to discuss the scheme changing from a benefit to a loan.

Some 43% of all those claiming SMI have rejected the offer of a loan and will now lose the payments, which help homeowners on certain benefits pay the interest on their mortgage.

The DWP said it was reasonable that those who received help with the mortgage were asked to pay the money back, given their home was likely to increase in value.

But campaigners have also renewed calls for the Government to take a fresh look at the system.

"These lamentable figures show that thousands of people have still not responded to the significant changes on mortgage interest loans being pushed by the DWP," said Stephen Lloyd, the Liberal Democrat work and pensions spokesman.

"Is this because they are closing their eyes and hoping it will go away, or is it because their vulnerability means they just don't understand what the change means? Who knows.

"What it does prove is this is yet another cack-handed benefit change by the Tories which is wholly unnecessary, and is already causing anxiety amongst some of our most disadvantaged, marginalised citizens.

"Even at this late stage I would urge the Government to cease the roll-out before even more people end up in greater debt."

SMI helps protect claimants on qualifying benefits with mortgages from repossession when out of work, retired or sick by contributing towards the interest payments on their mortgage.

It stopped being a benefit and became an interest-bearing loan last month.

According to DWP figures up to May 16, letters about the change have been sent to 104,000 SMI claimants.

Of these, 76,000 have been contacted by phone to discuss the changes.

Staff have attempted contact by phone with a further 25,000 SMI claimants, and no attempt has been made to contact 4,000 other claimants by phone.

Of those successfully contacted by telephone, 45,000 have declined the loan - some 60% of all those contacted so far - and 11,000 claimants are undecided.

Some 20,000 claimants have said they will accept the offer of a loan, of which 12,000 have signed the new agreement.

Under the new system the mortgage holder does not have to pay the loan back until the property is sold, or transferred to someone else as long as there is enough equity left over.

Those who back the change say it is not the role of the taxpayer to subsidise other people's mortgages and acquire a property they can potentially pass onto their children.

A DWP spokesman said: "Over time, someone's house is likely to increase in value, so it's reasonable that anyone who has received financial help towards their mortgage should be asked to pay that back.

"Everyone who signs up to the loan will continue to get help with their mortgage interest, and it's only repayable if there is available equity when the property is sold.

"If people decide to decline the loan now but change their mind in future the loan can be backdated so in effect there would be no break in payments.

"We have already contacted everyone currently in receipt of SMI to explain the change but we are making sure people have time to review the documents, obtain advice and consider their options."

Helen Morrissey, personal finance specialist at Royal London, said the latest figures showed many people were not engaging with the changes.

"If people do not take up the offer of a loan then there will come a point where they are no longer receiving the mortgage benefit and we could see people fall into arrears," she added.

"It is clear that people need more support and assistance in making this decision and Government should ensure they get it."