Chancellor Jeremy Hunt says the new Mortgage Charter signed by lenders will “offer comfort” for 1.4 million homeowners who may struggle with the new remortgage deals they are set to move onto this year.
The charter follows Hunt calling in several lenders to Number 11 Downing Street last Friday to offer help to homeowners amid rising interest rates.
The Treasury says: “At this meeting, lenders agreed to new commitments to support borrowers to help them as we go through this difficult period.”
The 13-page charter was signed by 32 lenders (see below), which represents 85% of the mortgage market.
The lenders have agreed to:
- From 26 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.
- From 10 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 Financial Conduct Authority 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 six months by contacting their lender
One of the signatory lenders, The Nottingham chief executive Sue Hayes says: “This is a worrying time for many borrowers as the impact of successive base rate rises has put increasing pressure on household finances.
“We want to do everything we can to support customers through this period.”
Another, Leeds Building Society chief executive Richard Fearon adds: “At Leeds, we’ve already introduced a number of measures which have made a huge difference to borrowers, including not charging arrears fees since the Covid-19 pandemic and extending our product transfer window, and they will be strengthened by these additional commitments.”
Financial Conduct Authority chief executive Nikhil Rathi points out: “Mortgages remain a priority for the FCA, and we will continue to work closely with lenders to ensure borrowers are supported, as part of our work on consumers who might face financial difficulties.”
The move comes after the Bank of England hiked the base rate by 50 basis points to 5% last week, its 13th rate rise in a row taking it to the highest level in 15 years.
This leaves over one million borrowers on two- and five-year deals, often signed at sub 2% home loan rates, looking at remortgages this year that are currently three times as high.
The average two-year fixed residential mortgage rate lifted 3 basis points to 6.26% today from yesterday, according to Moneyfacts, while the average five-year fixed residential mortgage rate lifted by a single basis point to 5.87% from the previous day.
The lenders who have signed the charter are:
- Barclays
- Natwest, including RBS and Ulster Bank
- Lloyds, including Halifax and Scottish Widows
- Nationwide Building Society
- HSBC, including First Direct
- Santander
- Virgin Money, including Clydesdale Bank and Yorkshire Bank
- TSB
- Scottish Building Society
- Buckinghamshire Building Society
- Newcastle Building Society
- Hinkley & Rugby Building Society
- Nottingham Building Society
- Principality Building Society
- Suffolk Building Society
- West Bromwich Building Society
- Loughborough Building Society
- Family Building Society
- Coventry Building Society
- Yorkshire Building Society
- Skipton Building Society
- Leeds Building Society
- Bath Building Society
- Ecology Building Society
- The Vernon Building Society
- Leek Building Society
- Furness Building Society
- Melton Mowbray Building Society
- Glasgow Credit Union
- Darlington Building Society
- Progressive Building Society
- Co-op Bank
