State forks out too much to help struggling borrowers, says CML

Thursday 2nd February 2012

Struggling home owners who benefit from State aid to cover their mortgage interest payments should have the amount assessed according to their own individual mortgage.

Support for Mortgage Interest (SMI) is paid at a flat rate, currently 3.63%, which is determined by the Bank of England average mortgage rate.

But the Council of Mortgage Lenders is to lobby for the benefit to be paid at the rate payable on individual mortgages.

It says this would be fairer, and potentially much cheaper. The CML says it would help those borrowers facing a shortfall because the benefit does not cover their interest payments in full, while preventing over-payment in other cases.

The CML believes the Government could save around £26m a year by paying benefit at the rate payable on individual mortgages.

The CML is to put its arguments in response to an informal consultation on SMI by the Department for Work and Pensions (DWP).

The CML will also argue that both the current limit of £200,000 for qualifying mortgages and the 13-week waiting period for entitlement to benefit should be kept as they are. It also wants the payments to continue to be paid to the lenders.