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Understanding the Government’s Mortgage Charter

2nd August 2023 Posted in: Buy to Lets, Credit Score, Housing Market, Interest Rates, Mortgages, News, Press Releases

Mortgages, and finances in general, have been in the news constantly this year. You may have heard of the support measures brought in by the Government with the new Mortgage Charter, and be wondering what exactly it is, and could it help you!

The UK’s largest mortgage lenders and the Financial Conduct Authority have agreed with the Chancellor a set of standards that they will adopt when helping their regulated residential mortgage borrowers worried about higher rates, in response to the rising cost-of-living and base rate increases.

All lenders have agreed:

  • Anyone worried about their mortgage repayments can contact their lender for help and guidance, without any impact on their credit file and we would encourage you to contact your bank who are there to help.
  • Support for customers who are up-to-date with payments to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.
  • Lenders will provide well-timed information to help customers plan ahead should their current rate be due to end.
  • Lenders will offer tailored support for anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances.

Signatories to this Charter have also agreed:

  • From 26th June, 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.
  • With effect from 10th July 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 also 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.
  • A new deal between lenders, the FCA and the government permitting customers who are up to date with their payments to:
    • Switch to interest-only payments for six months or
    • extend their mortgage term to reduce their monthly payments and give customers the option to revert to their original term within 6 months by contacting their lender

The below mortgage lenders, representing approximately 90% of the mortgage market have signed up to the Charter. Many were already offering some level of support to their customers.

  • Aldermore Bank
  • Bank of Ireland UK
  • Barclays
  • Bath Building Society
  • Buckinghamshire Building Society
  • The Co-operative Bank, including Platform and Britannia
  • Coventry Building Society
  • Danske Bank
  • Darlington Building Society
  • Dudley Building Society
  • Earl Shilton Building Society
  • Ecology Building Society
  • Family Building Society
  • Furness Building Society
  • Glasgow Credit Union
  • Hinckley & Rugby Building Society
  • HSBC, including First Direct
  • Kensington Mortgage Company
  • Leeds Building Society
  • Leek Building Society
  • Lloyds, including Halifax and Scottish Widows
  • Loughborough Building Society
  • Melton Mowbray Building Society
  • Metro Bank
  • Monmouthshire Building Society
  • Nationwide Building Society
  • NatWest, including RBS and Ulster Bank
  • Newbury Building Society
  • Newcastle Building Society, including Manchester Building Society
  • Nottingham Building Society
  • Principality Building Society
  • Progressive Building Society
  • Santander
  • Scottish Building Society
  • Skipton Building Society
  • Suffolk Building Society
  • Teachers Building Society
  • Tipton & Coseley Building Society
  • TSB, including Whistletree
  • The Vernon Building Society
  • United Trust Bank Limited
  • Virgin Money, including Clydesdale Bank and Yorkshire Bank
  • West Bromwich Building Society
  • Yorkshire Building Society, including Accord Mortgages

It’s important to note that these commitments do not apply to BTL mortgages, although a select few lenders have agreed to extend their commitments. They also do not help mortgage prisoners, whose loans have been taken over by entities not on the above list of lenders, and usually don’t apply to customers who are already behind on payments; so perhaps the 2 groups most in need. Interpretation of the measures also differs by lenders, for example being able to lock in “up to” 6 months in advance.  The Charter will be of help to certain clients, but it is vital you have a full understanding and are sure changes are right for you before proceeding.

Always speak to your lender if you are considering the support measures offered, and never cancel your direct debit without discussing with your lender first.

They will discuss your options with you, and most importantly, explain the consequences and correct process to you. Temporarily extending your term or switching to interest only could result in less time to make the necessary repayments, so higher payments later down the line to make up for this, ending the term with debt remaining to be paid, or paying more interest overall. Whilst your credit score would not be impacted by using one of these options, it can’t be guaranteed that lenders wouldn’t take this into account when assessing an application in the future, as we saw with payment holidays during the Pandemic.

If you are struggling to meet your mortgage payments or insurance premiums, or are concerned about what will happen when your existing rate ends, we would always recommend you speak to a qualified mortgage adviser.

Contact us on 01702 538800 or enquiries@ingard.co.uk to discuss your mortgage needs today!

 

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.