Industry Updates: Jeremy Hunt's New Mortgage Charter

Concerns are growing in the UK mortgage market, which is currently experiencing turmoil, and there are genuine fears that this could lead to a collapse in the housing market.

So, what help has Jeremy Hunt agreed for mortgage-paying homeowners?

Chancellor Jeremy Hunt expressed his satisfaction with what he referred to as "a new mortgage charter that offers limited support to residential mortgage customers." However, it should be noted that this charter does not include any specific provisions to assist buy-to-let investors.

What are the three key aspects of the Hunts 2023 Mortgage Agreement?

Hunt announced that he has reached an agreement with banks, primary mortgage lenders, and the Financial Conduct Authority on three significant measures:

Individuals can now freely communicate with their bank or mortgage lender without negatively impacting their credit score. If a borrower is concerned about the financial implications for their family and decides to switch their mortgage to interest-only or extend its term, they can revert to their original mortgage deal within six months without any negative consequences on their credit score. This provides people with a valuable tool to manage their monthly budgets better. These changes have now taken effect.

For individuals facing the extreme situation of potential home loss, banks, and mortgage lenders have implemented several measures to avoid repossession whenever possible. However, in such extreme circumstances, they have mutually agreed to wait for a minimum 12-month period before initiating repossession proceedings without the homeowner's consent. Hunt believes these measures should relieve borrowers worried about high-interest rates and act as a support system for those who may face difficulties making timely repayments.

However, some leading mortgage broking firms have expressed skepticism regarding the six-month relief period provided for homeowners to return to their original mortgage deal. They question whether this timeframe is substantial and doubt that significant changes can be made within six months. They acknowledge that the payment shock only affects a small percentage of homeowners.

Provisions of the Agreement

The agreement reached between lenders, and Chancellor Hunt includes the following provisions:

Individuals concerned about their ability to repay their mortgage can contact their lender for assistance and information without it affecting their credit score. Homeowners will not face repossession of their homes within 12 months of missing their first payment. Customers nearing the end of their fixed-rate mortgage will be allowed to secure a new deal up to six months in advance. They can also apply for a better deal until their new term begins if one is available.

A new arrangement between lenders, the Financial Conduct Authority, and the government will allow customers to switch to an interest-only mortgage or extend their mortgage term for six months to reduce their monthly payments. They can revert to their original term within the first six months without undergoing a new affordability assessment or impacting their credit score. Support will be provided to customers who are up to date with their payments, enabling them to switch to a new mortgage deal at the end of their existing fixed-rate term without undergoing another affordability check. Timely information will be provided to help customers plan if their current mortgage rate is about to expire.

Personalised support will be offered to individuals experiencing financial difficulties, with professional assistance available. Options may include extending the mortgage term to lower payments, switching to interest-only payments, temporary payment deferrals, or a combination of interest and repayment adjustments. The appropriate solution will depend on the customer's specific circumstances.

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