From October, the standard interest rate used to calculate payments under the Support for Mortgage Interest Scheme (SMI) will be significantly reduced, leaving many benefit claimants facing potential shortfalls on their mortgage payments. From 1st October, the standard rate will be 3.63 per cent, based on the bank of England's published average mortgage interest rate. Before 1st october the rate was used in the calculations for SMI was 6.08 per cent.

This represents a significnant reduction and will mean that benefit claimants will receive reduced help with their mortgage payments. For some this may not matter if the interest applied to their mortgage is at or below the average 3.63%. However, for many this will mean there is a shortfall between the SMI payments and the actual interest being charged on their mortgage. This could result in a very real threat of re-possession if benefit claimants are unable to meet make up this shortfall.

A significant proportion of benefit claimants are likely to be trapped in mortgages with much higher interest rates than the Bank of England's published average - often as a result of having borrowed from so-called sub-prime lenders.

Benefits advisers and debt advisers should be on the lookout for problems which this might cause their clients, and seek ways to help them address any potential problems with their mortgage lenders before arrears can accumulate. Debt advisers mays need to revise their clients' financial statements and make revised lower offers to their creditors if their disposable income is going to be reduced by this change to the SMI.

For more details on the Support for Mortgage Interest Scheme visit Directgov: Getting help with your mortgage interest payments