A state benefit to help struggling home owners has been slammed by the mortgage industry for being out of touch with market prices.
Experts believe Income Support Mortgage Interest, which pays all or part of the interest on mortgage repayments for those who claim Jobseekers’ Allowance or Income Support and have mortgages up to £100,000, should undergo radical reform.
They claim ISMI is out of touch with today’s average house price of £158,100 and are calling for the benefit’s £100,000 cap to be raised.
Steve Cox, operations director at Spicerhaart Financial Services, says: “While it’s encouraging that there is support for those claiming benefits and looking to purchase property, the ISMI cap is outdated.
“The average loan size has increased dramatically and for consumers to take advantage of this support, a new higher limit should be put in place.”
Cox adds that raising the threshold could potentially prevent spiralling repossessions.
Steven Marks, lending executive at Newcastle, says: “Increasing financial hardship and rates of repossession could have serious consequences for home owners.
“It seems fair for the government to look at the ISMI threshold and con-sider an increase, given how out of touch it is.” He adds: “There are a number of areas where growth in house values and average mortgage size has outstripped the support that’s available from the government.”
The Council of Mortgage Lenders is campaigning for ISMI reform.
A spokesman for the CML says: “We would like the government to ensure the ISMI limit reflects market values. If it had been indexed fully to house price movements since 1997, the threshold would now stand at £285,000.”
Those entitled to the payout have to wait nine months before they receive their first payment.