Struggling homeowners will need help paying their mortgages as the furlough scheme ends this month, say UK Finance and the Building Societies Association.
The government’s Support for Mortgage Interest loan scheme helps homeowners who are on benefits, but must wait 39 weeks to claim.
But the bodies say during that “time their financial situation may become so difficult that they are unable to remain in their home”.
The government’s furlough scheme, which supported people who could not work from home during the pandemic ends, on 1 October.
There are 1.6 million people on the Coronavirus Job Retention Scheme, or furlough, according to HMRC data released last week.
The two financial services bodies call for two key changes to Support for Mortgage Interest to help homeowners.
They want the government to cut the waiting time people can apply for Support for Mortgage Interest from 39 weeks to 13 weeks, “to make sure help is given when people need it most”.
The bodies also say people on Universal Credit should be allowed to claim Support for Mortgage Interest if they are working on reduced hours.
They add: “Support for Mortgage Interest is a loan and not a benefit, meaning these changes will have a very limited impact on the government purse, but will have a huge impact on the households that will benefit.”
Mortgage lenders have provided over 2.9 million mortgage payment deferrals to help homeowners during the pandemic, the associations say.
But they add, while lenders will continue to support those still struggling, some homeowners will also benefit from Support for Mortgage Interest.
Building Societies Association head of mortgage and housing policy Paul Broadhead says: “With the end of the furlough scheme only days away, there is a likelihood that unemployment will rise.
“Without urgent modification of the Support for Mortgage Interest scheme, the risk of home repossession could become a reality for many despite the best efforts of lenders.
“Without the reforms, we expect more government funding will be required for the provision of housing benefits for former homeowners who were unable to get the financial support they needed, when they needed it.”
UK Finance director of mortgages Charles Roe adds: “The current wait time and eligibility criteria for Support for Mortgage Interest is preventing much-needed help going to struggling homeowners before their mortgage arrears start building up.
“As the furlough scheme comes to a close, we may see more people needing to use Support for Mortgage Interest.
“UK Finance and the BSA are calling on the government to urgently review the scheme’s eligibility criteria and reduce the existing wait time of over nine months.”
Money Advice Trust director of external affairs and partnerships the charity Jane Tully says: “With furlough ending on 1 October and with many people facing the risk of unemployment and reduced hours, accessing support through Universal Credit and Support for Mortgage Interest will be crucial.
“However, for homeowners struggling to meet mortgage payments, the 39-week wait for help from Support for Mortgage Interest, risks the build-up of arrears and potential home repossession.
Tully, who also runs the National Debtline charity, adds: “Mortgage borrowers caught at the sharp end of the impact of Covid, need the Government to act now by reducing the wait for Support for Mortgage Interest to 13 weeks and changing the earnings rules under Universal Credit to ensure they can access the vital support they need.”
