UK banks have agreed to give mortgage holders a 12-month grace period before their homes are repossessed should they fall behind with their repayments.
Homeowners will also be able to switch to interest-only for six months or temporarily lengthen mortgage terms for the same period without affecting credit ratings in new measures announced by Jeremy Hunt. The Chancellor met with lenders on Friday (23rd June) to agree on a deal amid growing alarm at rising interest rates.
Hunt said following “These measures should offer comfort to those who are anxious about high interest rates and support for those who do get into difficulty.” According to UK Finance, repossessions are currently well below pre-pandemic levels with a total of 750 homes repossessed by lenders in the first quarter of this year, up from a low of 140 in the final three months of 2020. In the fourth quarter of 2019 some 1,340 were repossessed.”
The lenders insist they are doing their best to help customers affected by climbing mortgage rates. Recent research by HSBC shows that only 3% of people are aware that they can contact their bank or building society to discuss their financial worries without it impacting their credit score. Alongside existing support, HSBC says it is continuing to look at ways it can help customers, while Nationwide has launched a health checklist which allows its members to see the options that may be available. NatWest said it understands that some mortgage customers might be concerned and noted that it offers an extensive range of support measures.
Ele Clark, Which? Money Senior Editor, said “With mortgage rates continuing to go up, and another likely base rate rise from the Bank of England later this week, mortgage holders who are approaching the end of their fixed rates – as well as those on tracker or standard variable rate mortgages – will understandably be concerned about their repayments.”
“The first thing these borrowers should do is talk to their lender about what support is available, which may include a temporary break from payments, interest-only payments or extending the term of your mortgage. The best option for you will depend on your personal circumstances, but rest assured that discussing options with your lender will not affect your credit rating.”
“The Financial Conduct Authority previously wrote to banks to remind them of their obligations to serve customers, especially those experiencing financial difficulties, and the regulator must continue to monitor this to ensure firms are offering support that is tailored to individual customers’ needs.”
David Postings, Chief Executive of UK Finance said “Lenders recognise and understand this is an anxious time for mortgage customers and there is a lot of support available. Lenders have been working to contact and support millions of customers.”
“Following today’s meeting with the Chancellor and FCA, we will be working with regulators to continue to deliver a range of support options for customers. Anyone who is worried about their finances should speak to their lender to find out what options are available to help. Contacting your lender to talk about the options available will not impact your credit score.”