Support for Mortgage Interest NAFAO conference Burlington Hotel, Birmingham, 24 May 2018

Background OVERVIEW Helps towards mortgage interest for homeowners receiving income-related benefits Objective: to prevent repossession as far as is possible FISCAL CONSOLIDATION No impact on available support FAIRNESS Balance – individual need and taxpayer SUPPORTING NOTES Overview Original implementation of some form of mortgage interest support in 1948 Support for Mortgage Interest (SMI) provides help towards mortgage interest for homeowners receiving income-related benefits. The objective is to prevent repossession as far as is possible. Fiscal consolidation: SMI Loans will save over £160m per year in welfare spending without affecting the level of support available to claimants. Fairness: SMI helps homeowners acquire a valuable asset and a fair balance has to be struck between their needs and the cost to the taxpayer. Sustainability: the cost of providing SMI will rise as interest rates rise. SMI Loans ensure that the Government can continue to provide homeowners with help at the point of need. SUSTAINABILITY Costs rise with interest rates Help at point of need

The process Communications: Individual letters FAQ Booklet Telephone calls (Serco) No loan Take-up loan No further communication Benefit stops (6 weeks) Sent loan agreement & charge form with completion guidance Agreement & charge form returned At least 6 weeks given to consider options SUPPORTING NOTES All claimants received information in the form of letters, a leaflet, FAQ booklet and telephone calls from a third party provider, Serco. This information takes the form of letters, an information leaflet, a FAQ booklet and telephone discussions. Where a claimant wishes to take up the SMI Loan offer they are sent a loan agreement and a charge form to complete and return. They also receive detailed guidance on how to complete these documents. Those contacted later than 6 April in the process SMI benefit may continue in payment. Every claimant is given at least six weeks from the loan offer date to consider their options. Benefit becomes loan payment

How will SMI Loans work? Standard Interest Rate (SIR) Same level of support as with benefit Applied to set limit Claimant Bank of England AMR 2.61% Loans can be backdated to 6 April Introduced 6 April 2018 Lender Voluntary payments at any time Current Gilt rate [1.5%] Usually secured as 2nd charge on property Payable only if sufficient equity Repaid on sale or transfer Interest bearing loan SUPPORTING NOTES From 6 April 2018 a new loans based scheme replaced SMI benefit. The level of support available to claimants will be the same as for SMI benefit. Neither claimants nor mortgage lenders will see any difference in the payments they receive & claimants will enjoy the same level of protection against the risk of repossession. SMI Loan payments will continue to be calculated using a Standard Interest Rate (SIR) applied to the claimant’s outstanding mortgage up to a set limit. The SIR is based on the monthly Bank of England published average mortgage rate (currently 2.61%). SMI Loans will be interest-bearing. Interest will be charged at the Gilt Forecast Rate, reflecting the cost of Government borrowing. The rate is currently 1.5%, rising to 1.7% in July 2018. SMI Loans will usually be secured on the claimant’s property. DWP will issue and manage SMI Loans, including the recovery process. As is the case now, DWP will determine eligibility, calculate the allowances and make payments directly to lenders. DWP will not seek recovery until the property is sold or transferred, although a recipient may volunteer repayment at any time. Eligible claimants may choose to accept or decline an SMI Loan at any time. SMI Loans can be backdated to 6 April 2018 if an eligible claimant chooses to take up the offer of a loan at a later date.

How will LMI work? (continued) Repayable only if equity available Past payments as a benefit DWP - Loan issue, management & recovery Accepting or declining the SMI loan at any time Can be backdated to 6 April 2018 SUPPORTING NOTES If the amount of equity available after the sale of the property is less than the amount due to be recovered, DWP will write off the balance. Any SMI benefit received before a claimant transfers to SMI Loans will not be counted as a loan and will not be recoverable. DWP will issue and manage SMI Loans, including the recovery process. As is the case now, DWP will determine eligibility, calculate the allowances and make payments directly to lenders. Eligible claimants may choose to accept or decline an SMI Loan at any time. SMI Loans can be backdated to 6 April 2018 if an eligible claimant chooses to take up the offer of a loan at a later date.

Vulnerable claimants PROCESS Process in place to help claimants who may lack the mental capacity to make financial decisions Referral to specially trained staff ATTORNEY/DEPUTY Claimant will need representative (power of attorney/Deputy by the Court of Protection/Scottish equivalent DWP will appoint Financial Deputy/Intervener where one not in place CONTINUED BENEFIT SUPPORTING NOTES A process is in place to help claimants who may lack the mental capacity to make financial decisions. These cases will be referred to specially trained staff who will establish the claimant’s capacity and whether they have an appointee. In order to accept an SMI loan these claimants will need a representative who has power of attorney or has been appointed as a Deputy by the Court of Protection (or Scottish equivalent). The Department will take action to appoint a Financial Deputy (Financial Intervener in Scotland) where there is not one in place. In such cases SMI as a benefit may continue until at least November 2018. In such cases benefit may continue until at least November 2018

Current status All current claimants contacted by letter Telephone contact Take-up of loan and stated intention to take-up increasing DWP Focus Returned Forms Seamless Transfer to loan for claimants and lenders Factsheet available for stakeholder use SUPPORTING NOTES The SMI caseload changes over time as new claimants join and others leave. The current ‘live’ caseload is in the region of [latest stats] claimants. There were around 103,000 claimants of SMI benefit on 6th April when it turned into a loan. All claimants of SMI benefit have now been contacted. Telephone contact has been attempted with around 96% of cases. 4% claimants are yet to be contacted by phone. Over 70% claimants have been successfully contacted by phone. Around a quarter of claimants we’ve tried to contact we’ve not been successful. Loan take-up is increasing gradually. Around 20,000 claimants have stated their intention to take up a loan, of which 12,000 have returned their forms. Work is focussing on ensuring that where have returned their forms within the required period and are now held as an SMI Loan customer, the transfer from SMI benefit to loan is seamless. Factsheet is available for stakeholder use, and DWP happy to consider requests for assistance with telephony handling lines, myth-buster documents etc.

Further SMI Information Stakeholder factsheet available from DWP – speak to me in today’s session Visit: www.gov.uk/support-for-mortgage-interest for further information