Lenders will now be able to offer options to struggling borrowers
The Financial Conduct Authority (FCA) has swiftly made changes to its rulebook to support key commitments made by lenders at last week’s mortgage summit, held by the chancellor.
The regulator said lenders would now be able to offer borrowers a switch to interest-only payments for six months and an extension to their mortgage term to reduce their monthly payments, with the option to switch back within six months. Both can now be offered without an affordability check.
Lenders who have signed up to the government’s Mortgage Charter should make these options accessible and provide clear information on the impact taking these options might have, including on changes to future payments, in line with FCA rules.
While the measures are designed to provide relief for people dealing with higher interest rates, the FCA reminded borrowers that making changes, even temporary ones, could result in higher monthly payments in the future or paying back more overall.
We've moved quickly to make changes to our rules to support the commitments made by lenders as part of @hmtreasury's #mortgage charter. https://t.co/q9oraG3pnX pic.twitter.com/bqYivwdPSX
— Financial Conduct Authority (@TheFCA) June 30, 2023
“Last week’s summit built on the substantial work the FCA has previously carried out to prepare for a higher interest rate environment,” said Sheldon Mills, executive director for consumers and competition at the Financial Conduct Authority.
“If you can keep up with your mortgage payments, you should, as changing your contract could lead to higher payments down the line. But if you are worried about making your payments, contact your lender as soon as possible as they have a range of options to help.”
Mills pointed out that while regulation could not stop rates from rising, the wider measures that the FCA had put in place over the past decade would make sure people got the support they needed when they need it.
The regulator earlier published guidance for mortgage lenders to help customers worried about or already struggling with their mortgage payments due to the rising cost-of-living.
In addition, the FCA’s Consumer Duty, which takes effect at the end of July, will also mean lenders must offer support that meets their customers individual needs, communicate clearly with people about their options, and provide decent customer service.
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