The UK regulator has asked banks to consider cutting mortgage payments for borrowers struggling with rising bills, as it revealed 356,000 homeowners could be at risk of missing their monthly installments by the summer of 2024.
Guidance from the Financial Conduct Authority confirms how lenders can support customers who have missed payments or are concerned they may fall behind, including reducing monthly amounts owed, or temporarily deferring payments, by extending the term of their mortgage involves reducing
However, it does not go as far as guidance issued during the Covid-19 crisis, when lenders were urged to provide more payment holidays and interest-only arrangements during the pandemic lockdown.
Bank owners were concerned that they could face complaints or regulatory action if they allowed customers to lower payments, as changing the terms of the mortgage could make it more expensive in the long term and harm the borrower’s credit. Can affect score.
The latest guidance comes as the FCA released new projections showing 356,000 borrowers could face struggling to make their mortgage payments by June 2024, although this is down from the 570,000 estimated to be struggling in September last year . The latest figures include mortgage holders who are turning down fixed rate deals and could be paying an extra £340 a month on average due to higher interest rates.
Homeowners have been hit by higher mortgage payments as a result of September’s disastrous mini-budget that roiled financial markets and pushed up borrowing costs. While lending rates have come down since then, this has resulted in increased payments for borrowers with variable rate mortgages as well as those who have had to refinance at higher rates.
Despite the latest FCA guidance, banks may still face regulatory action if they are found to be misleading or unfairly treating customers, for example, if borrowers are misreporting the lender’s income for a long period of time. There has been a misguided attempt to raise returns on mortgages to help raise—period.
“Mortgage borrowers should carefully consider any steps they take and customers who can continue to make their payments should continue to do so,” the regulator said in its guidance.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Our research shows that most people are making mortgage payments, but some may be facing difficulties.
“If you are struggling to pay your mortgage, or are worried that you might, you don’t need to manage alone. Your lender has a range of tools available to help. As If you have concerns, contact them, don’t wait until you are about to miss a payment before doing so. Talking to them about your options will not affect your credit rating.