The Financial Conduct Authority (FCA) has made rulebook changes in an effort to grant households relief from rising mortgage rates.
Lenders will be able to offer borrowers a switch to interest-only payments for six months. They will also be able to offer an extension to mortgage terms to reduce monthly payments, with borrowers given the option to switch back within six months. The FCA said these can now be offered without an affordability check. The regulator also said that borrowers will not be forced to leave their home without their consent in less than a year from their first missed payment, unless in exceptional circumstances.
Sheldon Mills, Executive Director for Consumers & Competition at the FCA, said “Last week’s summit built on the substantial work the FCA has previously carried out to prepare for a higher interest rate environment.”
“If you can keep up with your mortgage payments, you should, as changing your contract could lead to higher payments down the line. But if you are worried about making your payments, contact your lender as soon as possible as they have a range of options to help.”
“Regulation cannot stop rates from rising, but the wider measures we’ve put in place over the past decade will make sure people get the support they need, when they need it.”
The FCA says taht Although arrears and repossessions currently remain low, lenders need to demonstrate how they are preparing for a rise in borrowers experiencing financial difficulty and the action they are taking to support their customers. Mortgage lenders must provide them with tailored support if they are worried about or already struggling with their mortgage payments.
Since the increased scrutiny from the regulator, lenders have stepped up and proactively contacted customers around 16.5 million times to discuss support options, with this figure expected to rise to more than 20 million over 2023.
The FCA has also seen more than 2 million customers provided with active support by their lenders to manage their finances. This includes budgeting tools, debt advice and, in some cases, mortgage forbearance, such as reduced payments, lengthened loan terms or switch to interest-only.
The FCA’s Consumer Duty, which takes effect at the end of July, will also mean lenders must offer support that meets their customers individual needs, communicate clearly with people about their options and provide decent customer service.