Mortgage holders need certainty and security in the coronavirus storm

The coronavirus crisis has impacted millions of households, including homeowners with mortgages. Polling that JRF commissioned from YouGov from 22 to 28 May confirmed that homeowners are not always well placed to financially weather unexpected changes to their incomes, with almost 40% of mortgage holders having suffered reduced income due to coronavirus, and almost one in five worried about meeting their housing costs after the lockdown lifts – around 1.3 million households. This is higher again for households with children: almost 23% of mortgage holders with children are worried about how they will meet their housing costs after lockdown.

We welcome the work by the Government and the banking sector to offer all mortgage holders who need one a three-month mortgage holiday, and the recent announcement of extending this to 31 October 2020. This is vital support, giving mortgage holders breathing space as they deal with job losses and reduced income, when over 20% of mortgage holders have less than £1,500 in savings, and 16% of those on a three-month mortgage holiday don’t know how they will manage their housing costs when it ends.

But more needs to be done to keep homeowners afloat. They need as much certainty as possible to manage costs in the medium and long-term.

Recommendations

The Government should:

• Make important changes to the Support for Mortgage Interest loan (SMI) by:

- Relaxing the zero-earnings rule under Universal Credit.

- Adapting the SMI structure by reverting to the original grant structure of the SMI before it was changed in 2018, or changing to zero-interest loan structure.

- Reducing the wait time for SMI payments to three months, so the balance of risk between government, individuals and lenders is fair, and interest arrears on mortgages can be better managed.

• Work with lenders to extend the mortgage holiday period until the reformed SMI support is available, so mortgage holders are not left without support.
• Ensure mortgage holders are not required by lenders to repay interest accrued over the mortgage holiday period as a lump sum immediately after.
• Support those eligible for SMI (where SMI is appropriate) to apply promptly; work with lenders to encourage mortgage holiday applicants to apply too.