Help, of a sort, is at hand in the shape of the new Mortgage Charter. Companies representing well over 90 per cent of all mortgage lending have signed up to this new charter, which should be support to any borrower facing difficulties this autumn, winter and well into 2024.
Interest rates and the new charter
The Bank of England decided to hold its main interest rate steady in September. This has been for the first time in around 18 months and gives cause for cautious optimism that further rises may be behind us.
Analysts firmly believe the existing higher level of interest rates will not drop significantly for two years or more. A consumer group predicts that 800,000 mortgage holders will be coming off their fixed-rate deals between now and next summer. Unfortunately, they’ll be hit with more expensive monthly payments.
But, assistance is on the horizon with the introduction of the new Mortgage Charter.
What is the Mortgage Charter?
The key points for the Mortgage Charter are that:
- anyone worried about not keeping up with their mortgage repayments. Or getting into mortgage arrears can contact their lender for help and guidance, without any impact on their credit file.
- all lenders have contributed towards a pool of highly trained staff who can negotiate improved mortgage conditions. Like a temporary switch to interest-only payments, a temporary deferral of payments. Or agreeing for a few months that a mortgage will be ‘part interest/part repayment’ to reduce immediate outgoings.
- any borrower approaching the end of a fixed-rate deal will be able to lock in a deal up to six months ahead. So, for example, if your deal comes to an end in, February, you could lock in a new deal now.
- and if you discover the deal you lock in has become better by the time your new repayment term starts, you can switch to that better deal even at the last minute.
- then, if circumstances change, you can switch back to your original deal if that’s more favourable. Within six months of starting the new repayment or interest-only schedule.
It’s always worth speaking to a mortgage adviser to discuss your mortgage options. Our preferred mortgage advisers have a 5-star rating on Trustpilot. And are on hand to help you find the right mortgage for your circumstances.
Remember that your home may be repossessed if you do not keep up repayments on your mortgage.
Why Introduce a Mortgage Charter?
It’s in no one’s interest for mortgage defaults to increase so this is designed to help. Mortgage defaults are bad news for the borrower, whose credit rating could be affected and bad news for the lender who is faced with a troubled customer and reduced repayments.
There were 81,900 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the second quarter of 2023. A slight rise from the previous quarter. And there were 8,980 buy-to-let mortgages in arrears of 2.5 per cent or more during the same period.
No one is taking those figures lightly but given the scale of the interest rate increases, there is genuine delight that matters are not a great deal worse.
Some of that is down to the early work of the Mortgage Charter. And the increased willingness of lenders to take a sympathetic approach to borrowers with temporary problems.
But it’s key that you let your lender know as early as possible if you think you’re in difficulties. It’s nothing to be embarrassed by and is absolutely worth discussing with your bank or building society to find a positive way forward.
To get the best idea of your mortgage options it’s always worth speaking to a mortgage adviser.
Always remember that your home may be repossessed if you do not keep up repayments on your mortgage.
Last Updated: October 4th, 2023