Mortgage lenders agree to offer more flexible support to struggling borrowers after Martin Lewis meeting with Chancellor
The UK's biggest mortgage lenders have today agreed to introduce a new set of support measures for struggling borrowers, including allowing homeowners to increase their mortgage term or switch to interest-only repayments temporarily without any impact on their credit rating. These reflect several of the measures MoneySavingExpert.com founder Martin Lewis has been calling for since last autumn.
Update: 27 June 2023: MoneySavingExpert.com founder Martin Lewis has written a detailed blog explaining what the new support measures mean for struggling mortgage borrowers.
See Martin's Mortgage 'forbearance' changes blog.
The new commitments from lenders were agreed at a meeting with Chancellor Jeremy Hunt today (Friday 23 June), and come after Martin's conversation with the Chancellor earlier this week. We don't yet know when the new measures will take effect.
Mortgage interest rates have risen rapidly in recent weeks, and they're expected to keep going up after the Bank of England raised the base rate from 4.5% to 5% this week. As a result, it's expected that hundreds of thousands of borrowers could face payment difficulties over the next year.
Martin: 'I'm pleased to see it looks like the Chancellor has listened – but we need to make sure mortgage holders understand what support they can get'
Martin Lewis, founder of MoneySavingExpert.com, said: "The unprecedented steep rise in mortgage rates is causing a nightmare for many with variable mortgages and those coming off fixes. Therefore, the most important thing we can focus on right now is appropriate, flexible forbearance measures. While the Bank of England's aim is intended to squeeze people’s disposable incomes, no one wants people’s lives to be ruined by arrears and repossessions – and that is the urgent protection we need to focus on.
"I met the Chancellor on Wednesday and reiterated that the minimum we needed was to ensure that when people asked for help from lenders, they knew that if things changed, it wouldn't be detrimental to their financial situation and their credit scores would be protected as much as possible.
"I'm pleased to see it looks like the Chancellor has listened and those measures are going to be put in practice by the banks. We need to make sure everybody knows their rights if they are in trouble with their mortgage, so they can feel comfortable speaking with their lender and understand the measures that they can request for help.”
The measures agreed at today's meeting
Here are the key points from the Chancellor's summit with mortgage providers:
- You'll have more flexibility to change mortgage terms. You'll be able to switch to interest-only repayments or extend your mortgage term for up to six months, lowering your monthly payments.
Crucially, this won't have an impact on your credit rating and you'll be able to switch back to your previous terms afterwards, so you won't be locked in – this extra flexibility is something Martin has repeatedly called for.
- You'll be able to lock in a new fixed deal up to six months ahead of your existing one ending. But you won't be tied in – if a better deal comes up, you'll be able to apply for it instead. We've asked what fees, if any, will apply as part of this and will update this when we know more.
- Your home won't be forcibly repossessed for at least 12 months from your first missed payment. If you're struggling, this should hopefully give you some breathing space to sort things out.
- You'll be able to speak to your lender about your options without any effect on your credit rating. It's worth noting that this is already the case, as set out by industry regulator the Financial Conduct Authority earlier this year.
No start date has yet been announced for the new support – we've asked the Treasury and we'll update this story when we know more.
Struggling with your mortgage? Talk to your lender
Earlier this year, the FCA set out fresh guidance for lenders and made it clear that it expects mortgage providers to help struggling homeowners (including those who have and haven't missed repayments) and to be transparent about the range of options that they can consider.
In the first instance:
- If you're worried about keeping up with your mortgage repayments, you should contact your lender as soon as possible. Don't wait until you've missed a payment to get in touch. The earlier you reach out, the broader the range of options that could be available to you.
- As noted above, simply reaching out to your lender to talk about your options will NOT impact your credit file or rating. Nearly 50% of struggling borrowers mistakenly believe that it will, according to the FCA's research. However, where you ultimately agree to mortgage support, this can impact your file.
For more help if you're struggling with your mortgage payments, see our full Mortgage arrears guide.