The Mortgage Charter

New rules have been introduced to help homeowners who have seen their mortgage repayments shoot up following the recent rises in interest rates.

What the Mortgage Charter does

Lenders which have signed up to the new Mortgage Charter will now allow people to temporarily switch their mortgage to interest-only or extend the term of their mortgage to bring down the cost of their monthly repayments.

The agreement between the government, leading lenders and the Financial Conduct Authority which regulates the mortgage industry is only available to those with residential mortgages (so not people who own buy-to-let properties) and is a short-term measure.

If you can meet your new mortgage payments, you should continue to pay says the government as this will always be the best course of action and will always mean you pay less interest overall. But if you’re struggling, the Charter could offer valuable breathing space.

Which lenders have signed up to the Mortgage Charter?

Most of the major banks and building societies have signed up to the Charter. These lenders represent approximately 90% of the mortgage market. You can check if your lender has signed up on the government website.

The new rules

Lenders which have signed the Charter have agreed:

  • Borrowers will not be forced to leave their homes without their consent (apart from in exceptional circumstances) if it’s less than a year since they missed their first payment.
  • Borrowers coming to the end of a fixed rate deal can lock into a new 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.
  • Borrowers who are up to date with their payments can
    • 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 are available to mortgage borrowers who have not missed a payment. Borrowers will not need a new affordability check and their credit score won’t be affected.

All lenders (including those which have not signed up to the Charter) have agreed:

  • Anyone worried about their mortgage repayments can contact their lender for help and guidance, without this having any impact on their credit file.
  • Customers who are up to date with their mortgage payments will be able to switch to a new mortgage deal at the end of their existing fixed rate deal without having to go through another affordability check.
  • Lenders will provide well-timed information to help customers plan ahead if their current mortgage deal is due to end.
  • Lenders will offer tailored support to anyone struggling and will have highly trained staff available to help customers. Your options could include extending the term of your mortgage to reduce your monthly repayments, switching to an interest-only mortgage, taking a short break from your repayments or switching part of your mortgage to interest-only to lower your monthly repayments. The right option will depend on your circumstances.

Next steps

If you’re worried about high interest rates, the mortgage industry is encouraging you to contact your lender to find out what your options are.

If you’ve already fallen behind with your mortgage payments or are struggling with debt, you can get free confidential help and advice from charities like National Debtline, StepChange and Citizens Advice. They can advise you, and even act on your behalf to help with any debts you might have.

Get fee-free mortgage advice from L&C

If you’d like help and advice in choosing a new mortgage deal, we’ve teamed up with L&C Mortgages. They offer fee-free expert mortgage advice and their advisers can help you throughout your journey.