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Thousands being kept in dark about this major mortgage benefit being axed .

5760The Department for Work and Pensions (DWP) said it has yet to successfully contact 29,000 claimants of support for mortgage interest (SMI) by telephone, to discuss the scheme changing from a benefit to a loan.

Some 43% of all those claiming SMI have rejected the offer of a loan and will now lose the payments, which help homeowners on certain benefits pay the interest on their mortgage.

This error of judgement has been labelled as “cack-handed” by Stephen Lloyd, the Liberal Democrat work and pensions spokesman.

“These lamentable figures show that thousands of people have still not responded to the significant changes on mortgage interest loans being pushed by the DWP,” he said.

“Is this because they are closing their eyes and hoping it will go away or is it because their vulnerability means they just don’t understand what the change means? Who knows.

“What it does prove is this is yet another cack-handed benefit change by the Tories which is wholly unnecessary and is already causing anxiety amongst some of our most disadvantaged, marginalised citizens.

“Even at this late stage, I would urge the Government to cease the roll-out before even more people end up in greater debt.”

SMI was paid since the 1980s to people who fall onto benefits, almost half of them pensioners, to stop their homes being repossessed.

It met the bank interest portion of a mortgage up to a cap of £200,000.

It could not be put towards the capital value of a home.

According to DWP figures up to May 16, letters about the change have been sent to 104,000 SMI claimants.

Of these, 76,000 have been contacted by phone to discuss the changes.

Staff have attempted contact by phone with a further 25,000 SMI claimants, and no attempt has been made to contact 4,000 other claimants by phone.

Of those successfully contacted by telephone, 45,000 have declined the loan – some 60% of all those contacted so far – and 11,000 claimants are undecided.

What is this benefit?

Support for Mortgage Interest (SMI) was a benefit for people who fall on hard times and are struggling to keep up their mortgage payments.

It had existed in some form since at least the 1980s and was being paid to just over 100,000 people.

To qualify you had to be on one of these benefits: Income Support, Pension Credit, income-based jobseekers’ allowance or income-based disability benefit ESA.

The benefit could only cover interest charged by a bank, not the capital value of a house. It was paid up to a total of £200,000, or £100,000 for pensioners.

What’s changed?

The free benefit has been turned into a repayable loan since 6 April 2018, a cut of £150million a year.

That means if you accept help, you’ll have two loans secured on your home at the same time. One from the bank, one from the government.

As you grow older, the amount you owe the government will get bigger and bigger. That’s because the interest on the government loan will be set at the ‘forecast gilt rate’ – last summer it sat at 1.7% but was expected to rise at some point.

The big difference between the government loan and a mortgage is this: the government’s loan won’t have to be repaid each month.

Instead, the full amount is only due as soon as you die, sell your house or transfer ownership of it to a relative or friend.

The exception is if you die and have a husband or wife or civil partner. In that case, the loan only must be paid back after they die too.

There are transitional protections in place for people who haven’t yet decided about their SMI.

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