New Mortgage Charter

The Charter

The UK’s largest mortgage lenders and the Financial Conduct Authority have agreed with the Chancellor a set of standards that they will adopt when helping their regulated residential mortgage borrowers worried about higher rates.[1]

No lender wants to repossess someone’s home. And repossession is only done as either a last resort or when it is in the financial interests of the borrower. For this reason all lenders have an extensive range of measures that they use for customers experiencing difficulties. They will continue to use these in conjunction with the new measures agreed by the signatories to this Charter:

All lenders have agreed:

• Anyone worried about their mortgage repayments can contact their lender for help and guidance, without any impact on their credit file and we would encourage you to contact your bank who are there to help.
• Support for customers who are up-to-date with payments to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check[2].
• Lenders will provide well-timed information to help customers plan ahead should their current rate be due to end.
• Lenders will offer tailored support for anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances.

Signatories to this Charter have agreed:

• From 26th June, a borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment.[3]
• With effect from 10th July customers approaching the end of a fixed rate deal will have the chance to lock in a deal up to six months ahead. They will also be able to manage their new deal and request a better like for like deal with their lender right up until their new term starts, if one is available.[4]
• A new deal between lenders, the FCA and the government permitting customers who are up to date with their payments to:
• Switch to interest-only payments for six months or
• extend their mortgage term to reduce their monthly payments and give customers the option to revert to their original term within 6 months by contacting their lender

These options can be taken by customers who are up to date with their payments without a new affordability check or affecting their credit score[5]. Customers who are currently in arrears should continue to work with their lender for the support that they need.

The government confirmed it has delivered:

• action to make Support for Mortgage Interest easier to access; if you are on Universal Credit you can now receive help with your mortgage interest payments after three months
• record levels of funding for the Money and Pensions Service to provide debt advice in England

The?FCA?has introduced:

• new guidance clarifying how lenders can support borrowers impacted by the rising cost of living
• information for borrowers on the options and support available if they are struggling with payment

UK Finance, the trade association for mortgage lenders, will be launching a communications campaign to ensure customers know what to expect if they need support from their lender.

Next steps

The lenders, UK finance and the FCA have committed to implementing the full Charter at pace. It is important that borrowers have access to these new measures as soon as possible. It will require changes to the FCA rulebook as well as changes to lenders’ procedures. They will move quickly over the coming days and weeks to implement the Charter and will provide Government with an update on progress by Friday 30 June.

The FCA will work rapidly with signatories in order to adopt the necessary rules by Friday 30 June. The FCA’s Consumer Duty coming into force in July will also enable the FCA to support implementation of the Charter by its signatories.

The Prudential Regulation Authority have confirmed that the measures agreed in this Charter are not expected to lead to an immediate or automatic increase in capital requirements for banks, depending on the circumstances.

Participating mortgage lenders, led by UK Finance, will launch a communications campaign ensuring borrowers know what to expect when they contact their lender.

Lenders who have signed up to this Charter

• Barclays
• Bath Building Society
• Buckinghamshire Building Society
• The Co-operative Bank, including Platform and Britannia
• Coventry Building Society
• Darlington Building Society
• Earl Shilton Building Society
• Ecology Building Society
• Family Building Society
• Furness Building Society
• Glasgow Credit Union
• Hinkley & Rugby Building Society
• HSBC, including First Direct
• Leeds Building Society
• Leek Building Society
• Lloyds, including Halifax and Scottish Widows
• Loughborough Building Society
• Melton Mowbray Building Society
• Nationwide Building Society
• Natwest, including RBS and Ulster Bank
• Newcastle Building Society
• Nottingham Building Society
• Principality Building Society
• Progressive Building Society
• Santander
• Scottish Building Society
• Skipton Building Society
• Suffolk Building Society
• TSB
• The Vernon Building Society
• Virgin Money, including Clydesdale Bank and Yorkshire Bank
• West Bromwich Building Society
• Yorkshire Building Society

These lenders represent approximately over 85% of the mortgage market.

[1]?These commitments do not apply to Buy-to-Let mortgages

[2]?Applies to 97% of the mortgage market, where customers are up to date with payments and not seeking to borrow more or change their repayment type or term.

[3]?No further action will be taken if a Possession Order is granted from 26 June 2023.

[4]?Rates must be finalised two weeks before the new term starts.

[5]?Monthly payments after the support may be higher than they otherwise would have been and overall costs over the life of the mortgage will be higher. Affordability will need to be checked if borrowers wish to permanently convert to an interest-only mortgage, or where the mortgage term is proposed to be extended beyond the borrower’s expected retirement date.

For help with DIY mortgage shortfall agreements Contact Ben Clarke LL.M. email:[email protected] Mobile: 07595482020