As it stands, struggling homeowners are left to wait 39 weeks to claim SMI, which could make their financial situation worse.
The Building Societies Association (BSA) and UK Finance are calling for changes to SMI to help these homeowners to avoid their financial situation deteriorating by getting help sooner.
The pair are asking the government to permanently reduce the wait time to access SMI from 39 weeks to 13 weeks and to allow people on Universal Credit to claim SMI if they are working reduced hours.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “Lenders, government and regulators have collaborated well during the COVID-19 pandemic to ensure support has been available to mortgage holders who have experienced financial difficulties.
“However, as the end of these schemes is now in sight and unemployment looks set to rise sharply, without some further action the risk of home repossession could become a reality for many families and individuals despite the best efforts of lenders.
“To support struggling homeowners as they adjust to their new normal, modifications to the Support for Mortgage Interest scheme are needed now. With SMI already restructured as a loan rather than a benefit, reducing the wait time and making the scheme more flexible would not only provide a compassionate response to those financially impacted as a result of the pandemic, it shouldn’t have a long-term impact on government expenditure.
“Without the reforms we are recommending, 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.”
Charles Roe, director of mortgages at UK Finance, added: “The wait time and eligibility criteria for Support for Mortgage Interest is preventing much-needed help going to struggling homeowners when they need it most – before their financial circumstances get worse and mortgage arrears start building up.
“We are calling on the government to urgently review the SMI scheme eligibility criteria to ensure those struggling with payments are not waiting over nine months before they can access this support.”
