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  • Writer's pictureRhys Weaver

The Mortgage Charter

On Monday 26 June, the government announced a new Mortgage Charter to help with the rising mortgage costs. 32 mortgage lenders have now agreed to additional measures to support customers in conjunction with this. You can read the full charter here.

Some elements of the charter are already in place in with most lenders such as being able to contact the lender if you have concerns about meeting your mortgage payments and contacting the client to inform them that their fixe rate/benefit period is coming to an end.

The charter also pushes lenders to offer customers the chance to secure a retention deal “up to” 6 months in advance. This 6 month period become commonplace within the last 12 months with only a few larger banks/building societies holding out. However, they have left the wording vague by stating “up to” 6 months. With rates on the rise, if your ender only allows you to secure a deal 3-4 months in advance you will most likely apply to a new lender 6 months ahead of time for peace of mind.

A bigger change the charter wants is allowing customers to switch to interest only for a short time or extend the mortgage term without any credit checks or underwriting. This will mean accruing future interest and increasing the overall cost of your mortgage. However, it could be crucial for some people to help cash flow.

This will not help customers who are already in arrears on their mortgage or have a Buy To Let (BTL) Mortgage. That said of the latter, most BTL lending is already taken on interest only and for those that took their loans on repayment, most BTL lenders allow you to switch from repayment to interest only without much fuss. This doesn’t feel helpful though if you had a 2% interest only mortgage and now pay 6% because your payments have tripled but the rental income has not. This massive increase in cost for landlords will have further impacts on the rental market down the road and it will unlikely be positive.

Overall, the charter is trying to push lenders to be more flexible and helpful in this challenging time.

As ever, speak to a broker or your bank/building society to understand what will happen to your mortgage in the future and what you can do ease the rising costs.


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