The FCA has made changes to its rulebook to allow lenders to offer their mortgage customers breathing space, without having to run affordability checks. The changes support commitments made by lenders at last week’s mortgage summit held by Chancellor Jeremy Hunt.
Lenders will be able to offer borrowers the option of switching to interest-only payments for six months and to extend their mortgage term to reduce monthly payments, with the option of switching back within six months, with no need for an affordability check in either case.
The measures are designed to provide relief for people dealing with higher interest rates. But borrowers should be aware that making changes, even temporary ones, will very likely result in higher monthly payments in future, or see them paying back more overall.
To meet their commitment under the government’s charter, the FCA says, lenders who have signed up should make these options accessible. It is important they provide clear information on the impact these options might have, including changes to future payments.
The government’s charter also makes commitments relating to borrowers’ credit scores. Engagement is ongoing between government, lenders, credit reference agencies, and the FCA to agree how this can be implemented.
Although arrears and repossessions remain low, lenders need to demonstrate how they are preparing for a rise in borrowers experiencing financial difficulty and the action they are taking to support their customers, and provide tailored support.
Since coming under increased scrutiny from the regulator, lenders have stepped up and proactively contacted customers around 16.5 million times to discuss support options, with this figure expected to rise to more than 20 million over 2023.
The FCA has also seen more than two million customers provided with active support by lenders to manage their finances. This support includes budgeting tools, debt advice and mortgage forbearance, such as reduced payments, lengthened loan terms or switch to interest only.