Homeowners in NI: The Forgotten Group?

Northern Ireland, along with the rest of the U.K., is currently grappling with a significant surge in mortgage interest rates, a direct fallout from the economic policies introduced under Liz Truss’s brief tenure as Prime Minister. Truss's budget, which promised sweeping tax cuts and a bold economic vision, has instead left homeowners and prospective buyers in a state of uncertainty and financial strain.

Truss aimed to stimulate the UK economy through aggressive tax reductions and increased borrowing. However, the reaction from financial markets was swift and severe, with investors quickly losing confidence in the UK's fiscal stability. The pound plummeted, and the Bank of England was forced into a corner, hiking interest rates in a bid to stabilise the currency and curb inflation.

For Northern Ireland, the impact has been particularly pronounced. The country, already navigating the complexities of post-Brexit economic adjustments, has seen mortgage interest rates climb to levels not witnessed in over a decade. Homeowners, many of whom had enjoyed years of relatively low interest rates, are now facing steep increases in their monthly repayments. For those with variable-rate mortgages, the financial shock has been immediate, leaving households scrambling to adjust their budgets.

In the wake of these escalating interest rates, an increasing number of homeowners in Northern Ireland find themselves cornered into seeking assistance through Support for Mortgage Interest (SMI) loans.

An SMI loan is designed to help homeowners who are struggling to make their mortgage payments due to financial difficulties such as loss of employment, or other factors that significantly reduce their income. The scheme does not provide money directly to the homeowner; instead, it pays the interest on the mortgage to the lender, ensuring the mortgage does not fall into arrears.

To be eligible, homeowners must be receiving one of the qualifying benefits, such as Income Support, Jobseeker's Allowance, Universal Credit, or Pension Credit. 

The SMI loan is secured against the property, which means it doesn't require monthly repayments. However, the loan, along with the accrued interest, is repaid when the property is sold, ownership is transferred, or the borrower dies. The interest rate on the loan is set by the government and is intended to reflect the cost of borrowing without being punitive. For the government, it is a relatively safe way of offering public funds to those struggling with the assurance of it being returned.

For homeowners, the story is somewhat different. One of the foremost issues with with SMI loans is their restrictive eligibility criteria. Homeowners must already be in receipt of certain benefits to qualify, while those waiting to be processed by the benefits office cannot avail of the scheme. Even with their benefits secured, there are set waiting times before homeowners are able to receive SMI payments. The waiting period before SMI loans begin - currently 39 weeks for those on Universal Credit - can be critical for those on the brink of repossession. 

While these loans may temporarily alleviate the burden of mortgage payments, the deferred repayment model can be a double-edged sword. Homeowners are lulled into a false sense of security, unaware that the loan, along with the compounded interest, will eventually need to be paid. As the debt accumulates silently in the background, homeowners are left facing a substantial financial burden when the property is sold, transferred, or upon their demise.

The loan itself, offers a standardised approach that fails to address the diverse needs and circumstances of struggling homeowners. The one-size-fits-all nature of these loans overlooks the potential for alternative solutions, such as debt restructuring, buy-back schemes or shared equity. By pigeonholing homeowners into a rigid framework, SMI loans significantly limit options for homeowners at a time when they need it most.

Importantly, help for mortgage holders is a devolved issue, which means that Stormont does not have to follow the same schemes implemented by Westminster. Scotland and Wales have taken different approaches to struggling homeowners. 

In Wales, the government introduced a scheme called Help to Stay. Whilst the basis for the scheme is similar, an equity loan, further steps are taken to ensure the scheme covers more ground for homeowners. Help to Stay is open to anyone with a household income of less than £67,000, and the loan is interest free for the first five years. Additionally, Help to Stay secures the equity loan by a second charge, which reduces the revised mortgage payments to a level the homeowner can afford. 

Scotland, who are so often more inventive with their strategies, have taken the unusual approach of offering more than one scheme to give homeowners a choice - the Mortgage to Shared Equity scheme, and the Mortgage to Rent scheme. Mortgage to Shared Equity works by allowing the Scottish government to buy a stake in the property (up to 30%), so the homeowner can reduce their secured loan. The Mortgage to Rent scheme, allows homeowners to sell their homes to a housing association or council, and continue to live there as a tenant. Additionally, the Scottish government extended these schemes to help homeowners who have reached the end of their mortgage but can't afford to pay what's left.

Despite the various models tried and tested in other devolved governments, Stormont has decided to simply implement the same scheme as England. It could be argued that adopting Scotland's approach, which involves purchasing properties from struggling homeowners and renting them back out, would alleviate the current strain on the Housing Executive. Homeowners facing repossession frequently have to put their homes up for sale, leaving them with no choice but to join the housing register. It is important to note that if homeowners sell their homes before the date of their court appearance for repossession, the NIHE application process considers them to be making themselves homeless, and thus they do not qualify for homelessness points, even if they are indeed homeless.

With all of this in mind, it's difficult not to wonder if Stormont has seriously considered this. On behalf of someone facing repossession, I contacted all parties with Stormont MLA positions. Only Sinn Fein responded, stating that they would "do all we can to provide better support to struggling homeowners." As of yet, the SMI scheme appears to be a forgotten topic in Stormont.