The UK government has agreed a new Mortgage Charter with lenders who represent 90% of the residential mortgage market in the UK to help homeowners struggling with the cost of living crisis and increased mortgage interest rates.
Anyone worried about their mortgage repayments can contact their lender for help and guidance, without any impact on their credit file. Customers who are up-to-date with payments will be able to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.
The Mortgage Charter will be underpinned by new legal rules from the Financial Conduct Authority and changes to lenders’ mortgage procedures.
The key changes are as follows:
From 26th June 2023, a borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment. No further action will be taken if a Possession Order is granted from 26 June 2023.
With effect from 10th July 2023, customers approaching the end of a fixed rate deal will have the chance to lock in a deal up to six months ahead. They will be able to manage their new deal and request a better like for like deal with their lender right up until their new term starts, if one is available. Rates must be finalised two weeks before the new term starts.
Customers who are up to date with their payments can switch to interest-only payments for six months or extend their mortgage term to reduce their monthly payments and customers will have the option to revert to their original term within 6 months by contacting their lender.
These options can be taken by customers who are up to date with their payments without a new affordability check or affecting their credit score. Monthly payments after the support may be higher than they otherwise would have been and overall costs over the life of the mortgage will be higher.
Affordability will need to be checked if borrowers wish to permanently convert to an interest-only mortgage, or where the mortgage term is proposed to be extended beyond the borrower’s expected retirement date.
Customers who are currently in arrears should continue to work with their lender for the support that they need. If you live in Glasgow or Ayrshire, Govan Law Centre can help you if you are threatened with mortgage repossession. Contact us on freephone 0800 043 0306 or 0141 440 2503.
The UK government confirmed it has delivered action to make Support for Mortgage Interest easier to access; if you are on Universal Credit you can now receive help with your mortgage interest payments after three months.