Government urged not to change the ISMI rate on a monthly basis
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The Council of Mortgage Lenders and Shelter are calling on the government not to calculate the Income Support for Mortgage Interest rate on a monthly basis.
The chancellor has said that from this autumn ISMI will be linked to the Bank of England’s average mortgage rate.
But the CML says the Department for Work and Pensions could avoid administrative problems if it calculates the ISMI rate only when the Bank’s mortgage rate has fallen or risen by a certain percentage. The Bank calculates its rate on a monthly basis, based on data from lenders.
In the latest issue of News & Views the CML says: “It is possible, for example, that the rate at which ISMI is paid may only change when the average mortgage rate rises or falls by 0.5%, thus avoiding the administrative problems associated with changing it too frequently.”
Campbell Robb, chief executive of Shelter, says ISMI has been one of the key schemes holding back the tide of repossessions.
He says: “Introducing a system whereby rates change monthly will create uncertainty for thousands of borrowers already struggling.”
Robb wants to see the rate maintained at its current level.
He adds: “The reality is that most people on ISMI are on higher than average interest rates so there’s a danger it will no longer help those who need it most, which could trigger a surge in repossessions.
“The only solution is to ensure that ISMI is paid at the rate of interest consumers are currently being charged.”
The CML adds: “Last year the DWP says 204,000 households were getting mortgage loan payments through Income Support, Jobseeker’s Allowance or pension credit.
“We estimate that more than three-quarters of borrowers getting ISMI payments at the existing rate have no arrears on their mortgages - a clear indication that it is delivering the support intended.”
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