Guidance

Support for Mortgage Interest (SMI) Lender’s handbook

Updated 11 July 2025

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1. The aim of this handbook 

The aim of this handbook is to provide an overview of how the Support for Mortgage Interest (SMI) Scheme works for lenders who receive Support for Mortgage Interest payments on behalf of customers in receipt of benefits.

Please circulate to all relevant parties within your organisation. 

The following pages aim to improve understanding of the procedures and help ensure that payments are made on time and are for the correct amount in all cases.  

We are always happy to receive any suggestions or comments that will help us to improve the service we provide.

2. Introduction 

SMI supports homeowners receiving certain income related benefits. These are:

  • Employment and Support allowance (income related)  

  • Jobseeker’s Allowance (income based) 

  • Income Support 

  • Pension Credit 

  • Universal Credit 

SMI provides help towards interest payments for a mortgage or loan used to purchase a property and for loans for certain repairs and improvements to their home.   

On 6 April 2018, SMI changed from a benefit to an interest-bearing loan secured against the property by a legal charge. An SMI loan is repayable when the property is sold, or ownership transferred, and claimants can make voluntary repayments if they wish.  

Claimants can decide to accept or decline the offer of an SMI loan at any time, if they are eligible. Payments of SMI loans are normally paid to the lender but in some circumstances direct to the claimant: 

  • SMI loan payments are made directly to ‘qualifying lenders’ when they reside on the Qualifying Lenders Register (QLR).  Scheme members are listed on the QLR which is maintained by Bank Liaison Section (BLS)

  • where the lender is not on the QLR, the SMI loan is paid directly to the claimant. The claimant is then responsible for passing payments onto their lender and this is part of their Loan Agreement

Notifications are sent to the lender and/or the claimant when payments start, change and end.

3. How Support for Mortgage Interest works 

Working-age claimants must receive Universal Credit for a three-month qualifying period before they qualify for SMI. This was reduced from nine months in April 2023. Pension Credit claimants can get SMI immediately. 

SMI can help with the cost of interest on mortgages and certain other home loans up to specified loan caps: 

  • £200,000 for most working-age claimants 

  • £100,000 for Pension Credit claimants

The amount of SMI payable is not based on the actual amount of interest households pay on their mortgages or loans. Instead, it is calculated using a standard interest rate. The interest rate used to calculate the amount of SMI recipients will get is currently 3.66%.

Example: 

Individual has a £250,000 mortgage left to pay and are eligible for SMI for up to £200,000. 

At the current SMI interest rate, they will receive a loan of 3.66% of £200,000 across a year. This is £7,320 a year or £610 a month. 

SMI loans are repayable with interest when the property is sold, ownership is transferred, when the claimant dies, or on a voluntary basis. The interest charged on the amount of SMI loan payments is set for six-month periods at the average gilt rate published by the Office for Budget Responsibility. The current (as of January 2025) rate is 4.1%.

In April 2023, SMI was extended to in-work Universal Credit claimants, removing the previous ‘zero earnings’ rule. Previously, no SMI could be paid when a claimant or their partner was doing any paid work. Also, the qualifying period was reduced from nine months to three.

4. How lenders take part in the scheme 

Lenders must be registered with the Benefit Payment Systems Group at the Department for Work and Pensions to take part in the scheme. 

To opt out of the scheme, a lender must contact the Benefit Payment Systems Group. An opt out request received between 1 February and 1 April will take effect from 1 April in the next calendar year. A request received at any other time will take effect from the 1 April following the date of receipt. Similar arrangements apply to requests to rejoin after opting out. 

A benefit claimant whose lender opts out of the scheme will get their housing costs included in their benefit payment. The claimant will be responsible for paying this to their lender.

Qualifying lenders may contact the Benefit Payment Systems Group to: 

  • join or opt out of the scheme 

  • amend the information DWP holds about them 

Benefit Payment Systems Group
SMI Team
Peel Park Phase 2
Red zone First Floor
East Wing
Brunel Way
Blackpool
FY4 5ES

Email: BLS.MP2MLTEAM@DWP.GOV.UK

5. Lender’s Responsibilities 

The QLR needs to always have relevant information. Therefore, lenders must inform the DWP SMI Team bls.mp2mlteam@dwp.gov.uk promptly of any changes to their name, address or bank account details for payments made through the SMI scheme.  

It is in the interests of lenders to keep the information within the QLR up to date so DWP can ensure payments are paid accurately to lenders.  

There is no requirement to stay on the QLR. Lenders may inform the DWP at any time if they would like to deregister from the SMI scheme and be removed from the QLR. This would mean payments of SMI would go directly to the claimant rather than to the lender.

Lenders must fully complete the MI12 sections 7 and 8 including their 4-digit lender code(s) when completing new SMI applications.

Failure to do these may result in payments being made into an invalid/closed/incorrect lender.

It is important for us to be able to speak with lenders. For that reason, they must provide a point of contact for all DWP SMI payment related queries.  

Once SMI is in payment, lenders are required to apply the amount paid to the interest on the claimant’s mortgage and any qualifying loans. Any SMI exceeding the claimant’s liability must be applied in the following order: 

  • to any arrears of mortgage payment

  • capital repayments

  • to any other loan with the same lender

Upon request, lenders must inform the DWP of the amount outstanding on the claimant’s mortgage, and any recent changes in that amount. Further, they must notify the DWP as soon as possible when the claimant’s mortgage is redeemed or is expected to be shortly.

6. More information 

The Social Security (Mortgage Interest Payments) Act 1992 permits direct payments of mortgage interest to be made from income-related benefits. 

The Social Security Claims and Payment Regulations 1987 deals with the mortgage interest direct scheme – see Regulations 34A and 34B and Schedule 9A. The definition of a qualifying lender in Schedule 9A includes “any body incorporated under the Companies Act 1985 whose main objects include the making of loans secured by a mortgage of or a charge over land or (in Scotland) by a heritable security”. 

The Loans for Mortgage Interest Regulations 2017 governs the SMI loan scheme and details the responsibilities of lenders to provide DWP with the information required to administer SMI loans.

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