Mortgage Charter offers temporary help to owners

A package of government measures to help support struggling homeowners facing soaring mortgage rates. The Mortgage Charter sets out the standards lenders will adopt when helping their customers. Signatories will provide borrowers with new flexibilities to manage their mortgage payments over a short period.

Borrowers can expect: a 12-month repossession ban, ability to extend their mortgage term for up to six months, switch to interest-only deals, talk to their lender about their options without judgement. All options can be done without hurting a borrower's credit score.

Lenders include the nation’s largest, the Financial Conduct Authority, UK Finance, the government and others including the Building Societies’ Association have come together to provide borrowers with this Mortgage Charter.

Interest-only mortgages are cheaper as they involve only making monthly interest payments, but not repaying any of the debt. For example, someone with a 20-year mortgage term can temporarily switch to a 40-year term, reducing their monthly payments.

IMPLICATIONS

Switching to an interest only mortgage, even for a short period, will leave the borrower with less time to repay the mortgage balance. As a result, when they switch back to a repayment loan, more will eventually have to be repaid each month to make up for missed time.

However, The Government has made it clear that it will not be giving struggling homeowners any bailouts.

REPOSSESSIONS HOLIDAY

This breathing space will be a relief to homeowners worried that their properties will be repossessed if they fall behind on their mortgage payments. Homeowners will be protected from repossessions for 12 months under plans under the Charter.

The repossession holiday will be set up, similar to the one implemented in the pandemic. This means lenders will have to give customers 12 months' grace, from the point of the first missed payment.

BUY-TO-LET EXCLUDED

The new rules apply to over 80% per cent of mortgage lenders. However buy-to-let landlords have been excluded from the Charter and landlords will have to pass higher costs on to renters, mortgage brokers have warned.

LENDERS SIGNED UP TO THE CHARTER

NatWest, Nationwide, Barclays, HSBC, Santander, Lloyds Banking Group (including Halifax, Bank of Scotland and Lloyds Bank) and Virgin Money. Additional lenders have signed up since the initiative was announced. These include:

Aldermore Bank, Monmouthshire Building Society, Newbury Building Society, Teachers Building Society, Kensington Mortgage Company, Danske Bank, Metro Bank, TSB, Bank of Ireland UK, Tipton & Coseley Building Society, United Trust Bank Limited, Earl Shilton Building Society and Co-Op Bank.

The Charter is available HERE.  Enquiries about the publication should be sent HERE. METRO:   Martin Lewis explains temporary help for people struggling with mortgage payments