Research and analysis

Summary: Impact Assessment of Support for Mortgage Interest Loans

Published 6 May 2025

IFF Research: Lorna Adams, Sarah Cheesbrough, Sam Morris, Dani Cervantes, Georgia Mealings, Mohsin Uppal, Emily Clark

Overview

This research project provides insight into the implementation and impact of Support for Mortgage Interest (SMI), a longstanding policy introduced to prevent low-income homeowners from losing their homes by providing a loan to them. This loan contributes towards their mortgage interest.

SMI also has a secondary role; whilst for most recipients it is a support scheme to pay mortgage interest on an existing mortgage, disabled people (if receiving certain benefits) are permitted to purchase a home using the scheme, or to borrow funds to make adaptations to their home for their disability.

SMI was converted from a grant to a loan scheme in 2018, with the loan secured against the value of the property via taking a legal charge. Repayment of the SMI loan is limited to any available equity when the property is sold, transferred or when the claimant dies. This transition immediately resulted in a great reduction in the number of households receiving SMI. Published statistics^{[footnote 1]} show that there were 14,025 households in receipt of an SMI loan in August 2024 compared to more than 100,000 grant recipients before March 2018^{[footnote 2]}.

Changes made in April 2023 extended eligibility to working households on Universal Credit (UC), reduced the waiting period for eligibility from nine months to three, and allowed for SMI claims to restart without serving the qualifying period where short breaks in qualifying benefits occur for less than a six-month period (for example, due to moving into higher paid work). Beneficiaries of these changes are referred to in this research as ‘Cohort 2’ recipients. Those who would have been eligible previously are referred to as ‘Cohort 1’ recipients, even if they started claiming after the changes were made.

Research context

DWP identified a need for greater understanding of the effectiveness of SMI in protecting recipients against repossession of their homes, and the wider impact on their financial and housing circumstances. There was previously little evidence available to the department on the impact of SMI on recipients since the change from a benefit to a loan in 2018.

The main aim of the research was to assess the impact and effectiveness of SMI in protecting its recipients from repossession. DWP were also interested in the effectiveness of SMI in helping recipients meet their mortgage payments, and the wider impact on recipients’ financial and housing circumstances^{[footnote 3]}.

Methodology

The research took a theory-based approach, using a range of quantitative and qualitative techniques, united and directed by a Theory of Change and evaluation framework produced through a scoping stage. These were used to derive a set of 11 evaluation questions to be answered via the research, detailed in the main report.

The report is supported by a survey and in-depth interviews with people receiving the loan, and six^{[footnote 4]} interviews with mortgage lenders (findings of which are presented separately, in the Lender Annex of the main report). A total of 1,408 quantitative telephone surveys and 45 qualitative interviews with recipients took place between December 2023 and October 2024.

While the evaluation seeks to understand impact, the scope for the research does not include measuring impact numerically^{[footnote 5]}, nor an assessment of economic impact.

Research Findings

In summary, the research found that SMI reached the intended target groups, and had broadly the intended impact on recipients, reducing arrears and possessions; many recipients were very relieved to be able to remain in their home. However, there were some areas which could be improved around implementation (in particular the postal application process) and there were some recipients who reported a negative impact on well-being from SMI, predominantly because they did not see themselves as being on a sustainable pathway to leaving SMI. The main report provides a detailed summary of findings for each of the research questions.

Design and targeting

Regarding the design and targeting of SMI, the research found that:

• SMI reached the intended group of people; those interviewed were in mortgage arrears and without other realistic options to pay their mortgage
• although without a statistical calculation of impact, it is not possible to say exactly how many SMI loans were going to households which could afford to pay their mortgage in other ways, it seems unlikely that substantial numbers of people who did not need SMI were receiving it
• the recipient survey showed that the change in eligibility rules for SMI in April 2023 changed the profile of new SMI recipients, bringing in a younger cohort
• there is no evidence that recipients claiming under new rules were less in need of help; many would otherwise have lost their home and needed to rent
• most SMI recipients have a disability, and in Cohort 1 are mostly retirement age. Usually, they had started claiming SMI due to being prevented from working by a traumatic life event, often illness or acquiring a disability
• recipients rarely said that lenders had referred them to SMI

Implementation

In terms of implementation of SMI, the research found:

• the time it took to receive SMI from application was quite long, due to the paper-based application process
• these delays are likely to have blunted the impact of the otherwise well-received reduction in waiting time (from the start of a benefit claim to receiving SMI) from 9 to 3 months, since the application often takes longer than this. Recipients did not generally believe that they were protected from repossession during this time, causing stress to many
• although many recipients found the application easy, some did not, and many found waiting for a response stressful. Many had experienced traumatic life events leading to a loss of income and the need to claim SMI, and were ill-equipped to handle complex processes especially at that time

Impact

The research found substantial impact from SMI on recipients:

• recipients reported reduced hardship, by a small amount relative to their situation before SMI, and by a large amount relative to what their situation would have been if they were not receiving SMI
• recipients reported that in the absence of SMI, there would have been severe impacts on their financial situation and well-being
• in surveys and interviews recipients reported reduced arrears, and a reduced likelihood of losing their home. The research provides plentiful evidence that SMI has prevented many possessions
• recipients of SMI usually reported continuing hardship, in terms of ability to afford essentials. Related to this, for a minority of recipients, the reported impact on well-being of SMI was negative, with interviews suggesting this was where payments did not provide a route out of arrears, due to high mortgage rates
• the new option for UC customers to move into employment while on SMI was welcomed and used by new applicants for SMI, and the survey indicated that take-up could become widespread among the minority who are able to work
• most recipients interviewed said that if they lost their homes they would rent privately; this would mean claiming housing related benefits, which since they are benefits, rather than loans, would incur greater costs for government

1. Stat-Xplore allows you to download and customise Department for Work and Pensions (DWP) statistics – data retrieved on 13 March 2025. ↩

2. House of Commons Library (2023). Research Briefing: Support for Mortgage Interest Loans. August 2023. ↩

3. The research is not intended to assess the broad nature of SMI as a benefit or loan. ↩

4. The research originally aimed to secure interviews with 10 lenders, however, following recruitment challenges and delays, it was only possible to achieve a smaller sample. ↩

5. As might be achieved by, for example, a quasi-experimental design or randomised controlled trial. ↩