Safe as houses: strengthening the UK’s mortgage safety net
01 March 2021
01 March 2021
Society of Mortgage Professionals
A Building Society Association sponsored Social Market Foundation (SMF) report outlines the need to improve mortgage financial resilience, following reform to the Support for Mortgage Interest (SMI) welfare safety net in April 2018.
This report explores the subject of 'mortgage safety nets' - support for mortgage-holders in the event of loss of income or employment. It considers the implications of the coronavirus crisis for homeowners and how to strengthen support for mortgage-holders, with almost 800,000 households found to be vulnerable to repossession.
A key call out is the need for a mortgage protection insurance solution akin to mortgage payment protection insurance, but a better fit may be innovation with mortgage income protection but at the very the least, a mortgage protection discussion requirement would be a sensible step.
Key points from the report:
- Analysis of the Wealth and Assets Survey suggests that prior to the coronavirus pandemic about 770,000 households were in a financial position that would leave them vulnerable to repossession in the event of a loss of income.
- In a February 2021 Opinium survey of 2,000 mortgage-holders commissioned for this research, 29% reported decreased savings during the pandemic.
- Some 14% or mortgage holders also said they lacked the savings to cover even one mortgage payment. 3 in 10 (30%) said they could pay their mortgage for no more than two months.
- The UK’s Government-backed mortgage safety net has been eroded in recent years; SMI has shifted from a grant to a loan with the scheme soon to be only available to claimants entirely out of work.
- Learning lessons from countries including Australia and the United States, the UK Government should seek to refine the existing mortgage safety net and offer a time-limited grant and encourage wider uptake of mortgage payment protection insurance.
This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.