Tens of thousands of disabled people will be at risk of having their homes repossessed because the government is cutting spending on a mortgage interest support scheme, according to a national housing body.
The chancellor, George Osborne, announced in his emergency budget in June that the government would cut funding available through the Support for Mortgage Interest (SMI) scheme, which helps many homeowners on income-related benefits.
>From October, the rate paid will be cut from 6.08 per cent to the Bank of England average mortgage rate, which is currently about 3.67 per cent.
But the National Housing Federation (NHF), which represents housing associations in England, said this would mean many of the 64,000 disabled people who receive support through the scheme would be at risk of “plunging into arrears”.
About 5,000 of these disabled people – many of whom have high support needs – have used the scheme to obtain niche mortgages to pay for shared ownership homes provided by housing associations.
The federation also fears that many of the building societies that offer these niche mortgages will withdraw the products from the market because the new rates will no longer meet their costs.
David Orr, the federation’s chief executive, said it was “a particularly harsh way” to cut public spending because it would hit thousands of disabled people who would not be able to own a home outright or purchase one through shared ownership in any other way.
The Department for Work and Pensions (DWP) said it was changing the rate because more than 90 per cent of people were currently receiving more than they paid out in mortgage interest every month, which was “unfair to the taxpayer and not a good use of public funds”.
A DWP spokeswoman added: “Using the Bank of England rate will ensure that people still get the help they need with their mortgage interest payments.”
But NHF insisted that many of the disabled people currently receiving support through the scheme pay more than 3.67 per cent on their mortgages and so could be at risk of losing their homes.
Gavin Smart, NHF’s director of research, said the federation was concerned that the DWP did not appear to have carried out a comprehensive assessment of the impact of the spending cut on disabled people.
He said: “We are very concerned that when the rate drops to 3.67 per cent, a significant number of disabled people who use SMI as a way of accessing a secure and sustainable home of their own will be at risk of not being able to meet their repayments and at risk of losing their home.”
11 August 2010