23 June 2023
If you are covering the new measures lenders will offer to borrowers following Hunt’s meeting with a range of banks and building societies today, please see the following comment from Karen Noye, mortgage expert at Quilter:
"Today’s talks between bank executives and Chancellor Jeremy Hunt have finally yielded some slightly positive news for mortgage borrowers concerned about how they are going keep up with payments as interest rates continue to soar. The discussions have resulted in increased flexibility and support measures aimed at alleviating the financial burden on borrowers. For individuals worried about their mortgage payments, it is essential to understand the available options and take proactive steps to manage their finances effectively.
"One significant development arising from the talks is the temporary change in mortgage terms offered by lenders. Borrowers will now have the opportunity to make adjustments to their mortgage terms for a short period, such as switching to interest-only payments. This change can provide immediate relief by reducing monthly repayments. Importantly, borrowers can later return to their original mortgage deal within six months, ensuring continuity and stability while not impacting their credit score. Hopefully this can give people a bit of breathing room to find additional streams of income or get their finances in order. It also provides reassurance to borrowers who may be concerned about the long-term consequences of making changes to their mortgage arrangements. However, it is crucial to remain vigilant and understand that missing payments or opting for a complete payment break, commonly known as a mortgage holiday, may still affect future borrowing opportunities.
"Furthermore, lenders have agreed to a significant 12-month delay in initiating repossession proceedings against borrowers who are unable or unwilling to meet long-term payment obligations. This extension offers some slack for struggling homeowners, allowing them additional time to stabilise their financial situations. It is important for borrowers to engage with their lenders and explore options for repayment plans, mortgage holidays, or extensions to mortgage terms. Open and honest communication with lenders can pave the way for finding suitable solutions that prevent further financial distress.
"While these developments provide some relief, it is essential for borrowers to be proactive in managing their finances during this challenging period. Seeking professional advice from qualified mortgage professionals, debt management charities, or organisations like Citizens Advice can provide valuable guidance on budgeting and financial planning. These resources can assist borrowers in assessing their financial capabilities, exploring cost-cutting measures, and identifying additional sources of income.
"However, the government has dismissed suggestions of direct financial support, as it aims to support the Bank of England's battle against inflation. As interest rates rise, it is crucial for borrowers to evaluate their mortgage deals and consider taking action before fixed-rate agreements expire. Engaging with mortgage brokers or lenders well in advance of the expiration date can help secure favourable deals and mitigate the impact of rising rates.
"While interest rate hikes pose challenges, they can also present opportunities for savers. Higher interest rates on savings accounts may provide some relief for those with savings, potentially improving returns and offsetting the impact of increased mortgage costs. However, it is essential to ensure that banks and building societies pass on these rate increases in a timely manner, as recent criticism has highlighted delays in providing better rates to savers with easy-access accounts."
