What is the mortgage charter?
With interest rates rising to 5% from lows of 0.1% many homeowners are facing increased mortgage costs. The UK government wishes to be seen to be doing something to help homeowners and recently met with mortgage lenders to find ways to help homeowners who may be struggling to make their mortgage repayments.
What mortgage options does the mortgage charter introduce?
The mortgage charter brings in some specific ways to help mortgage holders:
- 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.
- 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.
- 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.
Which lenders are part of the mortgage charter?
85% of the UK mortgage market have signed up to the mortgage charter. The following lenders are part of the mortgage charter:
NatWest, including RBS and Ulster Bank
Lloyds, including Halifax and Scottish Widows
Nationwide Building Society
HSBC, including First Direct
Virgin Money, including Clydesdale Bank and Yorkshire Bank
Scottish Building Society
Buckinghamshire Building Society
Newcastle Building Society
Hinkley & Rugby Building Society
Nottingham Building Society
Principality Building Society
Suffolk Building Society
West Bromwich Building Society
Loughborough Building Society
Family Building Society
Coventry Building Society
Yorkshire Building Society
Skipton Building Society
Leeds Building Society
Bath Building Society
Ecology Building Society
The Vernon Building Society
Leek Building Society
Furness Building Society
Melton Mowbray Building Society
Glasgow Credit Union
Darlington Building Society
Progressive Building Society
Is the mortgage charter a good thing, does it do enough?
The mortgage charter allows mortgage holders some flexibility should they find that they are struggling to meet mortgage payments, that must be a good thing.
Unlike the 1990’s or 2008 we now have a much better mortgage market; better regulations, banks more adequately capitalised, lending stressed at higher levels. For these reasons we believe most of the scary headlines you will read are sensationalist.
The actual number of repossessions are very low with only 750 homeowners repossessed in Q1 of 2023. If this number starts to rise significantly then we may see some intervention at a government level.
We believe more QE will be coming soon, it just depends what form that takes.
For our view on interest rates, QE, inflation, and house prices you can read our latest report on the property market economy inflation here.