# UK Mortgage Interest Supplement changed from a benefit to a loan



## Brendan Burgess (10 Aug 2018)

From April 1 this year, the UK government changed their *Support for Mortgage Interest* from a welfare benefit to a loan.  So effectively, the borrowers were taking out a second mortgage on their property. The interest charged is 1.7% and the loan is not repayable until the house is sold, which, in many cases, will be on the death of the borrower. 

I think that this is an excellent system. In Ireland we provide no help at all to people who have bought their homes but struggle with the repayments. Yet, around 100,000 people get help with their rent. 

So, if Johnny can't pay his mortgage he gets no help at all. If he sells his house to a landlord, he will get Housing Assistance Payment to help pay the rent. 

As the interest cost is usually about half the rental cost, the state is paying twice as much.  Furthermore, if Johnny had a cheap tracker, it would be cheaper for the state to pay the entire mortgage than pay the rent. 

And of course, such a scheme, is infinitely better than the Mortgage to Rent scheme which is all or nothing and permanent. That is why so few cases have actually been concluded. 

But the thing which strikes me as most astonishing about the UK is the drop in the number of those claiming.  Around 124,000 received the SMI when it was a benefit. They estimated that around 105,000 would claim it when it switched to a loan.  

But as of 11 July, only 15,000 people have claimed it. This suggests that benefits are often not needed at all, and users will not claim them if they have to pay them back with interest. 

Brendan


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## Bronte (11 Aug 2018)

Very clever move. 

Ireland used to have a welfare payment that paid the interest if I recall correctly.


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