Social Justice

Mortgage-holders facing financial ‘cliff edge’ with end of support scheme

Homeowners are "already running out of options", researchers say, only able to access Government support by going without any income for nine consecutive months

Granby Four Streets homes, saved and restored by the community.

One in five mortgage holders, amounting to 1.6 million British households, are worried about how they will pay their mortgage in the coming months, according to new research by pollsters YouGov.

The survey, carried out for poverty prevention charity the Joseph Rowntree Foundation (JRF), also found one in three people with mortgages have lost income since the Covid-19 outbreak as most cut down on food, bills and items for homeschooling their kids, new research has shown.

The figures come as the government announces another national lockdown, with extensions to the furlough scheme and mortgage payment holidays. 

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Existing regulations for benefits claimants mean mortgage holders have to go without income for at least nine months before they can access Government support, and anyone working even one day a week is ineligible.

“It’s not right that during a time of huge uncertainty, many households whose incomes are being eroded by the coronavirus storm are discovering that they are excluded from the only lifeline that could help meet their housing costs,” Darren Baxter, policy and partnerships manager at JRF, said in a statement.

Nearly 60 per cent of homeowners who have seen income cuts during the pandemic have cut back on buying food. Meanwhile two in five with children have cut back on items for kids, including food – an estimated 350,000 households. 

Nearly 500,000 redundancies have been planned during the pandemic with fears that number will rise as the furlough scheme ends and is replaced by the less-generous Job Support Scheme.

The Covid-19 mortgage holiday also was due to finish at the end of October but nearly 900,000 households who are in work and have a mortgage expect their incomes to decrease within the next month – and 85 per cent are not eligible for help with housing costs.

Already we are seeing an unsustainable pattern of borrowing, using up savings and cutting back on essentials

Campaigners say there is an urgent need to reform the Support for Mortgage Interest (SMI) payment to help mortgage-holders stay in their homes through winter and throughout the rest of the pandemic.

The Government loan can currently only be given to people claiming Universal Credit and with no income. If someone in the home earns as little as £1 on top of Universal Credit payments, they cannot access the mortgage support.

This means anyone placed on furlough by their employer, using the Job Support Scheme, or working fewer hours than normal  is locked out of the scheme.

Because a household has to be out of both work and income for nine consecutive months to receive the SMI payment, anyone who applied at the start of lockdown would not receive support until December. For those applying now, it will take until July next year.

The Government must ease the zero-income restriction so that people can claim SMI while moving into work, a  JRF spokesperson said, as well as reducing the wait time to three months. The payment should also change to a grant rather than a loan, they said, to make it easier for people to lift themselves out of debt.

“Already we are seeing an unsustainable pattern of borrowing, using up savings and cutting back on essentials,” Baxter said. “As the mortgage holiday scheme closes and we head further into an unemployment crisis that has yet to peak, there is a real risk that mortgage-holders on low incomes will be pulled into poverty and hardship.

“Those that do qualify for support must wait until summer 2021 to access it, which puts an unacceptable level of stress on households whose options are already running out as we head towards Christmas.”

The Big Issue has approached the Government for comment.

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