Mortgage lenders have promised to do more to help homeowners who are struggling with their repayments.
The sector has agreed to be more flexible in the way it approaches borrowers who have been impacted by the cost-of-living squeeze.
Alongside offering tailored support to those who run into difficulties, lenders will also enable customers who are up to date with their payments to switch to a new mortgage deal without having to do another affordability test.
In addition, they will ensure highly trained and experienced staff are on hand to help customers when needed.
The pledge was made following a meeting between mortgage lenders, Chancellor Jeremy Hunt, the chair of regulator the Financial Conduct Authority (FCA) and MoneySavingExpert’s Martin Lewis.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “If you’re struggling to pay your mortgage, or are worried you might, you don’t need to struggle alone.
"Your lender has a range of tools available to help, so you should contact them as soon as possible.”
Why is this happening?
Britons were already coming under pressure as a result of high inflation, with steep increases to the cost of food, energy and petrol.
But they are also now facing higher mortgage rates due to a combination of increases to the Bank of England Bank Rate, which has been raised in a bid to tackle inflation, and the fallout from former Chancellor Kwasi Kwarteng’s mini-Budget.
The government called the meeting with lenders as it recognised that many borrowers were concerned about being able to afford increases to their mortgage payments, which for most people are their single largest monthly outgoing.
What help is available?
To help those who are concerned about increases to their monthly repayments, lenders have agreed that borrowers who are up to date with payments can switch to a new competitive mortgage deal without having to do an affordability test.
Concerns had been expressed that homeowners may be able to afford a new rate, but they would not be able to remortgage on to it, as they would not pass lenders’ strict affordability tests.
Affordability tests measure a homeowner's ability to repay their loan if interest rates were to rise to levels that are significantly higher than they are today.
Lenders have also agreed to provide well-timed information to enable customers to plan ahead before their current mortgage rate expires.
For those who are struggling, they have agreed to offer tailored support, such as extending the mortgage term to make monthly payments lower, offering a short-term reduction in repayments, or switching borrowers to an interest-only mortgage for a set period of time.
Finally, they will ensure highly trained staff are available to talk to people who have run into difficulties.
For its part, the government has confirmed it will take action to make Support for Mortgage Interest easier to access.
The support offers people on certain benefits, such as Universal Credit, Pension Credit and Income Support, help with mortgage interest payments.
It is also putting record levels of funding into the Money and Pension Service to provide debt advice in England.
The FCA has announced that it is launching a consultation on draft guidance clarifying how lenders can support borrowers who have been impacted by the rising cost of living.
It will also provide information for borrowers on the options and support that is available if they are struggling with their mortgage payments.
What should I do if I’m struggling to pay my mortgage?
If you are struggling to pay your mortgage, it is important that you contact your lender as soon as possible.
Banks and building societies work with people who run into difficulties and only repossess their home as a last resort. As detailed above, there are a lot of options available to you.
But you are likely to have more options if you start talking to your lender before you have already missed a payment.