Thousands of pensioners could be at risk of repossession, when they lose government help with their mortgage payments.
The support for mortgage interest (SMI) handout, which is paid to around 65,000 pensioners, will be withdrawn in April 2018 and replaced by a second mortgage from the government, which will the be be repaid with interest when the property is sold.
However, Royal London has warned that the letters that are being sent out to notify borrowers of the changes are not clear regarding the key details such as the interest rates on the loans, and many pensioners will not have access to the advice.
If they fail to comply with the letter, the borrowers have been warned by the insurance firms that they will lose help with their mortgage and could face repossession if they get into arrears as a result.
The Department for Work & Pensions (DWP) stated the SMI would continue to provide “robust” protection against repossession and recipients will receive written information about the loan.
They will then be able to book an appointment via telephone, with the SMI information provider and the DWP will also make them aware of the independent help and advice.
The government has not yet confirmed the interest rate, that will apply to the loan, investigations by Royal London suggests it initially could be 2.2 per cent.
The insurer said SMI recipients on pension credit, who are interested in only mortgages stretched into retirement, may not have money to pay the balance on the mortgages when they come to an end, this will be exacerbated if they have to pay money to the government on top.
The remaining balance is written off if the SMI loan amount is more than the equity left within the home when it’s sold, this could still leave claimants with no way of purchasing a new property and force them back into the rental market.
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