On the 26th June, Jeremy Hunt introduced the new Mortgage Charter in the House of Commons. Acknowledging the difficult position homeowners find themselves in, particularly those currently on fixed-rate deals due to expire, the Mortgage Charter aims to ease pressure and anxiety as the country navigates a difficult financial landscape.
What prompted the Mortgage Charter?
According to financial information service Moneyfacts, the average two-year fixed mortgage rate increased to 6.01% last week in the UK. Compared to May’s figures of 5.26%, the rise is steep and set to cause financial hardship across the country during a seemingly never-ending cost-of-living crisis.
In what has been billed as ‘the UK’s largest-ever mortgage shock’ round 800,000 homeowners across the country are about to find themselves with a repayment increase of nearly £3000 – an astronomical rise in outgoings for the average UK household. Therefore, the Mortgage Charter will be a welcome lifeline to people wondering how budgets are going to stretch that far.
In addition to escalating rates, lenders have been removing existing mortgage deals, adding to a palpable sense of public worry across the housing market.
The Mortgage Charter Explained
The Chancellor, in conjunction with the Financial Conduct Authority (FCA) and the UK’s largest mortgage lenders, have drawn up a set of standards to be adopted when communicating with worried homeowners. All parties agree that there is a lot of support on offer, but the deployment of that support will now be more focused and structured to give maximum assistance to those worried about losing their homes. Financial institutions have already started proactively contacting customers across the UK to offer additional support.
The lenders taking part in the scheme have agreed:
- Customers can contact lenders for advice and guidance if they are worried and this will not impact their credit score.
- Those who are up-to-date with their fixed-rate mortgage payments and looking to switch to a new deal at the end of their term, can do so without being subject to another affordability check.
- Lenders have committed to helping customers plan ahead with well-timed communications for those coming to the end of their current mortgage deal.
- Customers will be able to access a range of solutions, such as reduced payments by extending the term of their mortgage, a switch to interest-only payments or temporary payment deferral. Customers will be supported and guided by highly trained staff to find the right option.
- Customers no longer need to worry about being asked to leave their homes unless there are “exceptional circumstances.” Lenders will not ask people to leave their homes unless more than a year has passed since their first missed payment.
- From the 10th July, those approaching the end of a fixed-rate mortgage will be given the opportunity to agree a new deal up to 6 months in advance. They will also be allowed to manage their terms or request a better deal on a like-for-like basis until the day their new mortgage agreement starts.
“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?
Representing 85% of the mortgage market, these are the lenders committed to the Mortgage Charter so far:
