Help for mortgage holders announced
Worried mortgage holders whose fixed term deals are coming to an end are to be offered assistance.
The Prime Minister, Chancellor, Financial Conduct Authority (FCA) and lenders have agreed a way forward to lessen the impact of higher mortgage rates.
Those coming to the end of a fixed deal will be able to lock in a deal up to six months ahead, but also apply for a better deal if one becomes available.
Also, it will be possible for mortgage holders to switch to an interest-only mortgage for six months.
They will also be able to lengthen to term of their mortgage, which will bring down monthly repayments.
The Chancellor of the Exchequer, Jeremy Hunt, said: “There are two groups of people that we are particularly worried about.
“The first are people who are at real risk of losing their homes because they fall behind in their mortgage payments.
“And the second are people who are having to change their mortgage because their fixed rate comes to an end, and they’re worried about the impact on their family finances of higher mortgage rates.
“So today I agreed with the banks and the principal mortgage lenders and the Financial Conduct Authority three very important things.
“The first is that absolutely anyone can talk to their bank or their mortgage lender and it will have no impact whatsoever on their credit score.
“The second is that if you are anxious about the impact on your family finances and you change your mortgage to interest only or you extend the term of your mortgage and you want to go back to your original mortgage deal, within six months, you can do so, no questions asked and no impact on your credit score.
“That gives people a powerful new tool for managing their monthly budgets – and it will begin taking effect within the next two weeks.
“And finally for people who are at risk of losing their home in that extreme situation, the banks and mortgage lenders have a number of things in place.
“The last thing that they want to do to repossess a home, but in that extreme situation they have agreed there will be a minimum 12 month period before there’s a repossession without consent.
“These measures should offer comfort to those who are anxious about high interest rates and support for those who do get into difficulty.
“Tackling high inflation is the Prime Minister and my number one priority. We are absolutely committed to supporting the Bank of England to do what it takes.
“We know the pressure that families are feeling. That’s why we’ve introduced big support packages around £3,000 for the average household this year and last.
“But we will do what it takes, and we won’t flinch in our resolve because we know that getting rid of high inflation from our economy is the only way that we can ultimately relieve pressure on family finances and on businesses.”
Mike Bradley, a senior broker at Home Owners Advice said: “Lenders were already looking at these types of policies and some had introduced them.
“It is a shock to come off a fixed rate that might be less than a per cent, then to move to one that is six per cent.
“And it is to ease the shock that this help is being offered. It makes sense and is important that the tax payer is not being asked to bail out mortgage holders. That would do more harm to the economy.
“The Government has also released some figures that put the mortgage market in context.
“Mortgage arrears and defaults are below pre-pandemic levels – now 0.86 per cent, compared with 3.32 per cent in 2009.
“The proportion of disposable income spent on mortgage payments is 5.4 per cent – compared with 10 per cent in the 1990s before the financial crisis.
“Figures also showed that the average homeowner re-mortgaging over the last year had about a 50 per cent loan-to-value ratio.
“This shows that homeowners have considerable equity in their homes, which makes it easier to manage repayments.
“Of course what we want is for inflation to come back down and ease pressure on the Bank of England to put interest rates up again.”