Thousands of homeowners may face financial hardship, after it was announced that the government will cut the interest rate which is used to calculate how much financial help they receive.
There are 167,000 homeowners who receive financial assistance from the Support for Mortgage Interest (SMI) scheme, 71,000 of which are pensioners.
Those entitled to support can receive help for monthly payments, on mortgages worth up to £200,000, with the government directly paying the lender a certain amount based on a rate of 3.63 per cent.
However, due to a significant decrease in mortgage rates on the high-street, the rate will fall to 3.12 per cent, coming into effect on 6 July.
The change will result in homeowners who get support receiving £260 per month from the government, rather than £303, for a £100,000 mortgage over 25 years.
“It makes sense that the mortgage interest support we pay is tied to the Bank of England rate and that it should change as that rate changes,” said a spokeswoman for the DWP. “Mortgage support is not designed to cover an individual’s entire mortgage interest payment, but instead offers a measure of support for some people to prevent repossessions.”
SMI can be claimed by those who receive employment and support allowance, pension credit, and income-based jobseekers allowance. It is used to help cover borrower’s interest payments to their lender, although not the original money that was borrowed.