Borrowers must not fall in to the trap of believing the recently announced changes to Income Support for Mortgage Interest (ISMI) payments mean they have nothing to worry about.
ISMI benefit will, from next April, be available after 13 weeks and not 39 weeks as is currently the situation. At the moment, the benefit is only paid on the interest on loans up to £100,000, thereafter no support is given. From next April the upper limit for the benefit will move to £175 000.
This is welcome news for a small number of borrowers, however it is important that people do not mistake the headlines and simply believe there is now a state-sponsored safety net in place for those who struggle with their mortgage because of accident, sickness or unemployment.
Sara-Ann Burgess, Managing Director at payment protection insurance specialist Burgesses, comments: “I am pleased to see the government make changes in this area, but as usual they do not go far enough and they will do little to help the vast majority of borrowers in the UK who fall into problems with their mortgage in the years ahead. Those eligible to claim will still have to pay their mortgage for the first 13 weeks, before they are able to claim any help. Three months is a long time and even if lenders are prepared to work with borrowers if they fall behind on their payments, avoiding the debt mounting to unserviceable levels could be very difficult indeed. There are only a very small percentage of people eligible for the ISMI benefit, which is only open to those on Income Support, Pension Credit and income-based Jobseeker’s Allowance. Many people seeing all of the headlines may fail to read further into the issue and simply assume that the government has taken steps to provide cover for them. If people really want to look out for both themselves and their families, then relying on the ISMI changes is a very dangerous approach indeed. Looking out for the flexible and good value policies now available in the market is the only way people can be sure they are covered from the first day they are unable to work and that they will have money to pay the bills.”
Income protection insurance: News update: September 2008