as well as giving up stake in their home

• Unemployed homeowners can claim help with mortgage interest
• Government considering clawing money back with potential stake in home

The Government could charge interest on mortgage lifelines for unemployed homeowners as well as taking a stake in their home, as part of a major overhaul. Currently, unemployed homeowners can claim for Support for Mortgage Interest help to pay their mortgage, 13 weeks after signing up for Jobseeker’s Allowance and other income-related benefits - without having to pay it back.But a dramatic change could see the taxpayer take a stake in their home, as the scheme is turned into a loan system, with interest potentially charged. Current interest rates on taxpayer-backed loans range from the low 1.75 per cent starting rate put on Help to Buy deposit loans, to the RPI inflation plus 3 per cent on student loans, where borrowers are currently paying 6.3 per cent.

In a nutshell, the Government wants to recoup some money when mortgage support claimants sell their home or die. This is something currently being discussed by the Department for Work and Pensions, as reported by This is Money in December. One option being seriously considered is that homeowners could give up a stake in their property, in a similar way to how those boosting their deposits with the first part of the Help to Buy scheme do. A return to 39 weeks before SMI can be applied for, is also on the cards. This was the norm before the pre-financial crisis. A protection insurance specialist has even speculated on eight per cent interest on SMI payments. His figure is based on a long-standing standard rate used by the courts and the same one used for interest on the repayment of PPI claims. This has not changed despite the base rate diving to a record low of 0.5 per cent. Simon Burgess said: ‘Mortgages are now available at three per cent, so how could the DWP justify a rate which is nearly three times higher?’An 8 per cent interest rate would be seen as high and has the potential to be politically hugely unpopular, however.....Read more here