Unemployed households could have been underpaid in mortgage benefits, because of problems changing IT systems at the Department for Work and Pensions (DWP).

The DWP has said it has begun to reimburse people who were underpaid Support for Mortgage Interest (SMI) benefits over the last ten weeks.

The benefit, which is paid to home owners receiving other benefits including jobseeker's allowance, is usually calculated as the Bank of England base rate plus 1.58 per cent.

In the pre-budget report on 24 November, chancellor Alistair Darling pledged to support homeowners who lost their jobs by fixing interest on mortgages at 6.08 per cent instead of tracking the Bank of England base rate. It is due to continue for six months before reverting to base rate plus 1.58 per cent.

But on 27 January the DWP said that it had not completed the adjustment to its IT systems necessary to fix the benefit's rate at 6.08 per cent.

"It takes time to adapt our IT systems, but we are taking urgent action to ensure that customers do not lose out, and that cases are corrected to reflect the chancellor's commitment," it said.

A department spokesperson said: "Our IT systems automatically track the Bank of England rate, and add a further 1.58 per cent. When the Bank of England rates fell, our rate fell also for a few weeks."

DWP has adjusted the systems and will begin to pay the benefit at an interest rate of 8.81 per cent for five weeks from 2 February to 8 March, 2009 in a move to compensate people whose mortgages were underpaid. The rate will then return to 6.08 per cent.

"Most people will not see any change, as SMI is paid directly to your mortgage lender," a DWP spokesperson told CIO sister title Computerworld UK. The department had informed lenders about the delay and the plan for compensatory higher interest rates which are now in place.

The DWP could not provide information on the reason for the delay to change its IT systems, at time of writing.

Related articles:

DWP restructures £3bn IT services contract