UK jobless face mortgage aid rethink Homeowners who lose their jobs and seek help with mortgage payments might have to give up a stake in their property under a plan to reshape the welfare state for an era of austerity. At the moment, unemployed homeowners can claim Support for Mortgage Interest (SMI) to help them keep up payments and avoid eviction. Last year, this benefit was paid to 239,000 people at a cost of about £400m. Under the new plan, the state would recoup some of this money when claimants died or sold their home. A decision on whether to proceed swiftly with the idea during this parliament is likely to be taken within months, according to one Whitehall source. The Department for Work and Pensions said the government wanted to reform mortgage interest protection so it could continue to provide a "necessary safety net" while still being fair to taxpayers. "In the longer term, we intend to transform SMI from a benefit into a loan," he said. Ministers believe that the principle is sound given that homeowners tend to have much greater levels of personal wealth than those who do not own a property. However, the idea is likely to prove unpopular with those who believe they already contribute enough to the welfare state through taxes when they are in work. It could prompt fears that ministers will look for more ways to access the value tied up in people's homes to pay for other policies such as social care. All parties are grappling with ways to maintain the welfare state for the long term against a backdrop of rising demand and enduring public expenditure constraints. The Institute for Public Policy Research, a left-leaning think-tank, said SMI had played a big role in preventing a repeat of the large rise in repossessions that occurred during the recession of the early 1990s. Turning SMI into a loan would develop the role of the welfare state as "providing temporary support in times of need, responding to cyclical shocks to the economy and households, while controlling long-term costs," said Graeme Cooke, the organisation's research director. The plan was consistent with IPPR's proposal that much higher rates of income protection should be provided for working people who lose their job, to be repaid when they return to employment. However Mr Cooke said any scheme should allow homeowners to buy back any equity stake on good terms when they were back on their feet. Andrew Haldenby, director of Reform, a pro-market think-tank, also believed the plan underlined the evolution of the welfare state as ministers realised they could no longer supply all services on the same terms as before. He said: "More by accident than design, the contract between state and individual is being redrawn. There is no overall plan but nevertheless government is increasingly chary of offering something for nothing. Higher retirement ages, tuition fees and means-tested child benefit point the same way," he added. Philip Booth, programme director at the Institute of Economic Affairs, said it was important that the loan was a first charge on the property and charged at commercial interest rates "so as to not undermine a market for commercial insurance or mortgage rescheduling on commercial terms by lenders." "It is difficult to see a case for a general unconditional welfare benefit for mortgage interest being given by the government," he added.