The BSA welcomes the opportunity to respond to the call for evidence on Support for Mortgage Interest (SMI). The BSA has been calling for a review of SMI for some time now in letters to the Chancellor ahead of Budget statements, to the Treasury Select Committee during its inquiry into mortgage arrears in 2009 and 2010 and in our report 'A joined up approach to helping mortgage borrowers'.

In the current economic environment, SMI for many claimants is a critical payment, that is often the difference between repossession and remaining in their homes. The DWP impact assessment published in August 2010 found that 225,000 customers were in receipt of SMI as at November 2009. This is significantly more than the number of customers assisted under other Government support schemes. At Q1 2011, 2,621 homeowners were accepted under Mortgage Rescue and far fewer placed on the Homeowner Mortgage Support Scheme, which has now closed to new customers.

We see SMI as an important part of the overall 'safety net' for borrowers experiencing financial difficulties, but we also recognise the challenge that it needs to continue to demonstrate its effectiveness and provide value for money to the Government.

We believe that many of the proposals are worthy of further consideration. However, the Government must ensure that changes are only implemented following robust analysis and an impact assessment. Of particular concern to the BSA is the removal of direct payments to the lender, as there is a risk that rather than empowering borrowers to take control of their finances it could instead result in increased levels of mortgage arrears.

The full response can be accessed via the link below:

Support for Mortgage Interest - Response by the BSA