In the wake of soaring interest rates, mortgage holders in the UK are set to receive a one-year grace period before lenders initiate repossession proceedings. This resolution follows a meeting between Chancellor Jeremy Hunt and the UK’s major mortgage providers, as well as the Financial Conduct Authority (FCA).
At a Downing Street summit, Chancellor Hunt met with the heads of top financial institutions, including Lloyds, NatWest, Barclays, and Virgin Money. The group concurred that a repossession break, similar to one implemented during the COVID-19 pandemic, should be introduced in response to the base rate hike to 5%.
Following the meeting, the Chancellor explained that those who might be struggling with repayments can communicate with their banks or lenders to discuss their options. Furthermore, if they choose to modify the length of their repayment term or shift to interest-only plans, they can revert their decision within six months without affecting their credit rating.
However, there was no provision of assistance for renters, who are currently grappling with escalating rent costs or the risk of landlords selling properties due to rising mortgage costs, and their properties investments no longer being viable.
“There are two groups of people that we’re particularly worried about,” Hunt stated. “The first are people who are at real risk of losing their homes because they fall behind in their mortgage payments. And the second are people who are having to change their mortgage because their fixed rate comes to an end and they’re worried about the impact on their family finance since the higher mortgage rates.”
Later in the day, an announcement accompanied by FCA data revealed that in Q1 2023, 0.86% of residential mortgages were in arrears, a marked decrease from the 3.32% seen following the 2009 financial crash. Additionally, the proportion of disposable income directed towards mortgage payments stands at 5.4%, compared to 10% in the 1990s.
Martin Lewis, the founder of MoneySavingExpert.com, was one of the voices advocating for the measures: “I’m pleased to see it looks like the chancellor has listened and those measures are going to be put in practice by the banks. We need to make sure everybody knows their rights if they are in trouble with their mortgage, so they can feel comfortable speaking with their lender and understand the measures that they can request for help.”
Despite the progress, Labour leader Sir Keir Starmer emphasised the need for “actions, not words”. He voiced concerns of numerous mortgage holders and families across the country, saying that they “want a much stronger sense that the government is gripping this; action, not words.”
David Postings, Chief Executive of UK Finance, reassured that lenders are conscious of the anxiety customers are facing and reiterated that they have several support options at their disposal. Nikhil Rathi, chief executive of the Financial Conduct Authority, also acknowledged the productive meeting and promised swift action to support the agreed commitments.
Nikhil Rathi, chief executive of the Financial Conduct Authority, said. “Today’s productive meeting builds on the work we’ve done over the last year to ensure those who get into difficulty receive the tailored support they need. We’ll move quickly to make any changes needed to support today’s commitments.”