Hello and welcome to this month’s advice column.
You will no doubt have seen or heard that interest rates are at the highest they’ve been for 15 years, as the Bank of England (BoE) continues to increase the Base Rate to try to combat inflation. This has led to increasingly higher costs of mortgages and the fixed rates offered to borrowers.
This means that those taking out mortgages for the first time, or those coming to the end of their fixed-rate term, are now facing much higher rates compared to the historic lows we’ve seen since 2008.
On Monday, June 29, this year, the Chancellor of the Exchequer, announced that the government has introduced the Mortgage Charter.
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So what is the Mortgage Charter?
This is a set of standards set out by the government and the FCA that has been agreed to by a large number of mortgage lenders in the UK. The lenders have all agreed new support measures for customers struggling to manage their mortgage due to recent bank base rate rises.
What changes have been implemented through the Charter?
There are three main support options that have been introduced through the Mortgage Charter.
First, there is the option to switch to a new mortgage deal up to six months ahead of your fixed rate deal ending, without another affordability check.
Secondly, there is the option to switch to an interest-only deal, temporarily. There is also the option to switch back to your original term within six months.
Finally, signatories to the Charter have agreed that you will not be forced to leave your home without consent, in less than a year from your first missed payment, unless in exceptional circumstances.
Who does the Charter apply to?
The Charter applies to all mortgage customers of the lenders that have signed up to it. The support applies to residential mortgage customers and borrowers that are up-to-date with their repayments.
However, the Charter also aims to make it clear that all lenders offer support to borrowers who need it, you simply need to speak to them.
Will I only receive support if I miss payments?
Support with your mortgage is not exclusive to those who have missed payments, lenders offer support to any customer who asks for it. If you feel like you may miss a payment, make sure to let your lender know as soon as possible.
What should I do if my fixed rate mortgage deal is coming to an end?
Your lender and mortgage adviser will let you know that your deal is ending up to six months before it ends. If you are coming to the end of your fixed rate deal, you will be able to choose your new rate, in advance. Once you have requested this new rate, you will be able to request an improved deal up to two weeks before the next term.
These time frames may differ slightly from lender to lender, so make sure to discuss this with your mortgage adviser.
My lender is not a part of the Charter, can I still receive support?
All lenders in the UK have support for customers who request it, if needed. Speak to your adviser for more advice on the support your lender can offer you.
What if I have already missed mortgage payments?
You can still receive support, even if you have already missed mortgage payments. It is important that you contact your adviser and lender as soon as possible.
How many lenders have signed up to the Mortgage Charter?
Over 40 lenders have signed up to the Mortgage Charter, representing 85 per cent of the residential mortgage market. You can find the full list of lenders here.
How long will the charter be implemented for?
The FCA has stated that they will review the changes in one year's time.
Talk to a Mortgage Adviser
If you need any advice or guidance about talking to your lender regarding support, talk to a mortgage adviser. They are all fully aware of the Mortgage Charter and will be able to guide you through the process of requesting support.
But if you can continue making your monthly mortgage repayments in the usual way, that’s likely to be the best option for you. This is because by keeping up with your monthly payments as normal, you’ll pay less money back to your lender overall.
I hope that has proven useful and see you all next month.
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