32 lenders are added to the Mortgage Charter
According to Chancellor Jeremy Hunt, the new Mortgage Charter signed by lenders would “offer comfort” to 1.4 million homeowners who might struggle with the new refinance agreements they are expected to switch to this year.
Hunt requested the charter after inviting various lenders to Number 11 Downing Street on Friday to assist homeowners in the face of rising borrowing rates.
In a statement released by the Treasury, it is said that “at this meeting, lenders agreed to new commitments to support borrowers in order to help them as we go through this difficult period.”
32 lenders, or 85% of the mortgage industry, signed the charter’s 13 pages (see below).
The lenders concur to:
A borrower cannot be forced to leave their house without their consent starting on June 26 unless there are extraordinary circumstances and less than a year has passed since their first missed payment.
Customers nearing the conclusion of a fixed-rate agreement will have the opportunity to lock in a deal up to six months in advance starting on July 10. Additionally, they will be able to manage their new agreement and ask their lender for a better like-for-like deal up until the start of their new term, if one is available.
As part of a new agreement, lenders, the Financial Conduct Authority, and the government are allowing clients who have made all of their payments on time to:
Customers can extend the duration of their mortgage to lower their monthly payments, and by contacting their lender within six months, they have the choice to go back to the original term.
This is a frightening period for many borrowers since the impact of multiple base rate increases has put greater pressure on household budgets, according to Sue Hayes, chief executive of The Nottingham, one of the signatory lenders.
“We want to support customers in any way we can during this time,” the company said.
Richard Fearon, chief executive officer of Leeds Building Society, adds in another way: “At Leeds, we’ve already introduced a number of measures that 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.”
“Mortgages remain a priority for the FCA,” says Nikhil Rathi, chief executive of the Financial Conduct Authority, “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 action follows the Bank of England’s increase in the base rate by 50 basis points to 5% last week, which was the institution’s 13th straight rate increase and brought it to its highest level in 15 years.
This means that more than a million borrowers with two- and five-year contracts, frequently signed at house loan rates around 2%, are now considering remortgaging this year at rates that are currently three times as high.
According to Moneyfacts, the average rate for a two-year fixed residential mortgage increased by three basis points from yesterday to 6.26% today, while the average rate for a five-year fixed residential mortgage increased by one basis point to 5.87% today from the day before.
The charter was signed by the following lenders:
Natwest, including RBS and Ulster Bank
Lloyds, including Halifax and Scottish Widows
Nationwide Building Society
HSBC, including First Direct
Virgin Money, including Clydesdale Bank and Yorkshire Bank
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