Chancellor Jeremy Hunt MP has announced a set of measures designed to provide support to residential mortgage customers as interest rates continue to climb. The plans do not include any specific measures for buy-to-let investors.
The Charter – agreed between the UK Government, principal mortgage lenders and the FCA – has three key elements:
- Anyone can talk to their bank or mortgage lender for information and support, and this will have no impact on their credit score.
- People can choose to swap to an interest-only mortgage or extend their mortgage term, with the option to switch back to their original mortgage deal within six months ‘no questions asked’ and with no impact on their credit score.
- Customers won’t be forced to have their homes repossessed within 12 months of their first missed payment.
There is also flexibility for customers approaching the end of a fixed rate deal; they will have the opportunity to lock in a deal up to six months ahead and still apply for any better deals that are available right up to the start of their new term. Affordability checks will be waived for those switching to a new mortgage deal if they are up to date with their payments when their fixed term ends.
The proportion of disposable income spent on mortgage payments is currently at 5.4%, compared to around 10% in the 1990s and prior to the financial crisis.
Mr Hunt said the measures will take effect within the next two weeks. It is unclear how the commitments will be monitored and if or when they expire.