The director of insurance provider British Money said government proposals to transform the scheme from a benefit into a loan were “radical” and reinforced the need for homeowners to be given access new-style protection policies designed to pay out during times of hardship.
Under the current system, SMI provides unemployed homeowners with certain income-related benefits that help towards interest payments on their mortgages, or loans taken out for certain repairs and improvements to their home.
Payments normally go directly to the mortgage lender following a waiting period of 13 weeks after the homeowner signs up for Jobseeker’s Allowance and other income-related benefits, for mortgages up to £200,000.
Last year some £400m in benefit was paid to 239,000 families, but reforms to the system will see the capital limit of £200,000 for the benefit transformed into a repayable loan, charged to the property, with a capital limit of £100,000 and an extended waiting period of 39 weeks.
Mr Burgess said: “Mortgage lenders should take personal responsibility to ensure their borrowers have sufficient means to repay their mortgage, and this burden should not fall on the taxpayer.”
Ian Gwinnell, director of Staffordshire-based All Counties Financial, said: “I have seen the benefits of mortgage protection for my clients, especially after the collapse of Rover Group and the subsequent job losses. It doesn’t surprise me that the government is curbing this benefit, so the sale of these protection products should be a priority for an adviser.”