Major mortgage rule shake up from TODAY
Millions of borrowers can now ask for loan forgiveness thanks to a MAJOR change in the mortgage rules.
With the new regulation, you can reduce your monthly payments by extending your term or temporarily switching your mortgage to interest-only payments.
You can just ask your lender to make the transition; you won’t need to provide any additional information regarding your income or reveal your monthly spending commitments.
If you choose to accept the offer, it won’t have an impact on your credit score for six months.
Following an emergency conference in Downing Street, the main high street banks and financial regulators decided to relax the restrictions to aid struggling borrowers, which sparked the shake-up.
Since then, 30 lenders have endorsed the new mortgage charter to provide assistance to struggling families.
The charter aims to assist millions of homeowners whose monthly mortgage payments may significantly increase due to rising interest rates.
What has changed?
Lenders can now temporarily change the length of your mortgage agreement in order to temporarily lower your monthly payments for a period of up to six months.
Additionally, switching to interest-only payments for six months can lower your monthly cost.
Lenders won’t want any more details about your existing financial situation in order to approve the modification.
Your credit score won’t be impacted either.
Though this could help in the short term by cutting monthly payments, it’s important to keep in mind that you might end up paying back more in the long run.
Within six months, anyone adopting the temporary remedies is free to return to their original strategy.
Several further measures also take effect today.
Customers who are nearing the conclusion of a fixed-rate agreement can lock in a deal for up to six months in the future.
Before the reform, certain banks provided this, while others did so for a shorter period of time.
Now, borrowers may be confident that their bank will automatically give this timeframe.
However, homeowners can ask their lender for a better deal up until the beginning of their new term if one is offered, ensuring that they won’t lose out if rates drop in the future.
Any homeowner can consult their lender for guidance on payments without it having an adverse effect on their credit score.
Homeowners should get in touch with their lender if they want to benefit from any of these improvements.
The support does not apply to people who have already fallen behind on payments, so you must be current on your repayments to be eligible.
Why is a mortgage charter required?
In an effort to manage inflation, the Bank of England has raised the base rate 13 times since December 2021, from 0.1% to 5%.
Mortgage rates have skyrocketed as a result, leaving homeowners who set their rates less than two years ago with no choice but to refinance into a package that is significantly more expensive.
Both tracker mortgage rates, which are directly related to the base rate, and standard variable rates (SVRs), which individuals default to once a fix expires, are significantly higher.
For the first time this year, five-year fix interest rates spiked over 6% just one week ago.
A fortnight ago, two-year fixed deals reached 6.01% for the first rate in this year.
The new regulations of today are intended to provide struggling homeowners some breathing room.
Your home won’t be forfeited.
A borrower will no longer be compelled to vacate their property without their agreement within a year of first skipping a mortgage payment due to changes made to the laws governing home repossessions.
Unfortunately, the new regulations do not apply to you if you are already behind on your mortgage.
However, you should still speak with your lender because they might be able to provide you with other types of assistance, advised Paul Broadhead, head of mortgages and housing at the Building Societies Association.
According to each borrower’s unique situation, he said, lenders have a variety of instruments at their disposal to assist those who are behind on their payments.
These might include, for instance, extending the length of a mortgage, switching temporarily to interest-only payments, or providing a short-term payment break.
Outside of the new requirements outlined in the charter, all lenders offer support to their mortgage customers.
What does it mean to be “in arrears”?
You are in arrears if your mortgage payments are past due.
If you don’t make a payment when it’s due, your lender will get in touch with you within 15 days to remind you that it’s time.
Don’t wait for this letter to be delivered before taking action.
To achieve the best results and protect your mortgage, you must move quickly as soon as you can.
What other mortgage assistance is offered?
Contact your lender as soon as you anticipate a difficulty with your monthly mortgage payment, whether you won’t be able to make any payments, won’t be able to make all of your payments, or won’t be able to make them on time.
They have specific plans in place to assist you if you need them.
If you are having trouble making your payments, you can speak with your lender about the breathing room plan.
The breathing space plan prohibits the addition of fees and the charging of interest on any of your debts for a period of 60 days.
Bailiffs and debt collectors won’t be able to harm you.
Additionally, you might be able to ask for a payment holiday, during which you won’t have to make any payments.
Missed payments must be made up in the future, and interest and fees may continue to accrue.
Each company has a unique policy, so you’ll need to contact them to learn what assistance is offered.
By providing them with a low-interest loan, Support for Mortgage Interest (SMI) aids those receiving Universal Credit and other benefits.
The assistance goes towards mortgage payments or loans taken out to assist with house damage restoration.
When you sell your house, you will be required to pay back the SMI loan with interest.
Up to £200,000 of your loan or mortgage interest will be covered by financial assistance.
However, if you are receiving Pension Credit, you can only receive up to £100,000.
The amount of interest that is added to the loan may increase or decrease, but the rate will not fluctuate more than twice a year; it is now 3.03%.
To learn if you qualify for a SMI loan, speak with the office that handles your benefit payments.
Don’t handle debt on your own.
If you’re concerned about money, there are several charities and agencies that provide free support and guidance.
The best course of action is to get in touch with one of these services before considering debt consolidation or working with a financial counsellor who will probably charge you.
Citizens Advice is a free, objective service that may assist you in developing a strategy for managing your debt, including which payments to prioritise and ways to cut your living expenses.
The organization’s website contains a helpful section with guidance on many elements of debt, but for more individualised assistance, you can get in touch with them personally via phone, online, or in person.
Another free advice service, StepChange, offers assistance and direction over the phone or online. It is also fully private.
To get a comprehensive picture of where your money goes, you’ll need to submit information about your debts, income, and home expenses.
Wherever it is possible, their advisors will assist you in developing a strategy for paying off all of your debts in a way that you can manage.
Those in England, Wales, and Scotland can get free, private help from National Debtline, a nonprofit.
They can be reached online or by phone at 0808 808 4000, from 9 am to 8 pm, Monday through Friday, and from 9.30 am to 1 pm, on Saturdays.
An advisor can help you determine how much you can afford to pay back and the best way to handle your debt.