…By Henry George for TDPel Media.
A “mortgage charter” has been agreed upon by lenders representing over 75% of the market, providing support for residential mortgage customers.
The charter allows borrowers to switch to an interest-only mortgage for six months or extend their mortgage term to reduce monthly payments, with the option to switch back to the original term within the first six months without a new affordability check or affecting credit scores.
Positive Steps, But Concerns Remain
Reena Sewraz, a money expert at Which?, welcomed the delay in repossessions without consent for at least 12 months and the flexibility for mortgage holders to make temporary changes to their mortgage terms.
However, she cautioned that interest-only payments or term extensions might not suit everyone and urged borrowers to discuss their options with lenders.
Sewraz emphasized the importance of lenders offering appropriate and tailored support to customers during these uncertain times.
Balancing Act for the Government
Laura Suter, head of personal finance at AJ Bell, highlighted the delicate balance the government faces in providing support to homeowners without exacerbating inflation through increased borrowing costs.
The agreement with mortgage companies strikes a middle ground, offering some assistance to the hardest-hit homeowners while mitigating the risk of inflation.
Suter noted that temporary switches to interest-only payments or term extensions can be easily reversed if financial situations improve.
Limited Relief, Lingering Concerns
While the short-term protection against repossessions may provide some relief to struggling borrowers, Alice Haine, a personal finance analyst, expressed doubts about its long-term effectiveness.
She believed that the current measures are unlikely to alleviate the widespread concerns among homeowners in the UK.
Mortgage costs remain a top financial concern for many individuals, whether they are first-time buyers, those looking to remortgage in the near future, or even those planning ahead in the coming years.
Temporary Help, Lingering Questions
Mark Harris, CEO of mortgage broker SPF Private Clients, welcomed the expected announcement and acknowledged that the payment shock only affects a small percentage of homeowners.
However, he questioned whether the six-month timeframe is sufficient and wondered about the changes that may occur within that period.
Harris highlighted the need for continued monitoring and assessment of the situation as time progresses.