Borrowers on variable rate deals are already feeling the impact of thirteen consecutive increases in the Bank of England base rate, with hundreds of thousands more homeowners likely to see payments jump in coming months when their fixed rate deals end.
With this in mind, the Government, in agreement with a large number of UK lenders, has introduced a ‘Mortgage Charter’ , which is designed to help those who are struggling to pay their mortgages.
What are the measures that have been agreed?Lenders have consented to several measures in the Charter. These include:
• Homeowners who are worried about their mortgage payments should seek help and guidance from their lenders, and doing so won’t have any impact on their credit score. Lenders will also need to provide customers whose current rates are due to end with information to help them plan ahead.
• Providing borrowers are up to date with all their mortgage payments, they should be able to switch to a new mortgage deal when their current deal ends without having to go through another affordability check.
• Lenders must offer “tailored support” to customers in need of help. Options that may be provided to struggling borrowers might include extending their mortgage term to reduce their payments for six months, or allowing them to switch to interest-only payments for six months.
• Borrowers won’t be forced to leave their homes less than a year after their first missed payment without their consent, unless in exceptional circumstances.
• Mortgage customers approaching the end of their fixed-rate deals will have the chance to lock in their next mortgage deal up to six months ahead from 10th July 10, although many lenders already allow borrowers to do this.
David Postings, chief executive of UK Finance, said; “Lenders recognise and understand this is an anxious time for mortgage customers and there is a lot of support available. Lenders have been contacting and supporting millions of customers and are working with the government and regulators to continue to deliver a range of support options for customers.
“Anyone who is worried about their finances should contact their lender to find out what options are available to help. Contacting your lender to talk about the options available will not impact your credit score.”
Which lenders have signed up to the Charter?Lenders representing 85% of the residential mortgage market have so far signed up to the charter.
They include the UK’s biggest lenders, such as Barclays, NatWest, Lloyds, including Halifax and Scottish Widows, HSBC including First Direct, Santander, Virgin Money and TSB. Many building societies have signed up to the charter too, including Nationwide, Yorkshire, Nottingham, West Bromwich, Skipton, and Leeds.
These lenders, led by trade body UK Finance, will run a communications campaign so that customers are made fully aware of the possible options available to them if they’re finding it hard to make ends meet.