WHAT IS THE MORTGAGE CHARTER?
The charter is intended to help millions of homeowners who are facing a huge jump in monthly mortgage repayments because of rising interest rates after the Bank of England upped rates to 5% last month
The help comes through the “Mortgage Charter” which is a set of measures the majority of mortgage lenders have signed up to.
The charter – agreed between the Government, principal mortgage lenders and the Financial Conduct Authority (FCA) – has been signed by over 40 lenders including Barclays, Nat West, Lloyds, Halifax and many others.
However, you should be aware that this particular mortgage support does not cover those with a buy-to-let mortgage.
Firstly, from July 10th, mortgage holders can switch their mortgage deal to an interest-only plan for up to six months.
This will temporarily bring down the monthly payments and they can switch back to their original deal with no impact to their credit score.
Mortgage holders will also be able to extend the length of their term.
As well as this, customers approaching the end of a fixed-rate deal will have the chance to lock in a new deal up to six months ahead.
They will also be able to manage their new deal and request a better like-for-like deal with their lender right up until their new term starts if one is available.
This means if you lock in a rate now in July, that rate will be honoured until your mortgage renews in January.
If a new deal comes and it’s better than the one you have locked in then you will be able to switch to it with no issue.
While this has often been offered by some lenders in the past, it is now a firm commitment from lenders signed up to the charter.
Of course, switching the terms of your mortgage can have impacts on how much you end up paying overall – so always speak to a mortgage broker first before making any big decisions.
For example, switching to interest-only reduces your monthly repayments but does mean you don’t actually pay off the capital you own.
Extending the length of your mortgage means you’ll take longer to pay it off and you’ll likely pay more interest over time.
Alongside this, lenders will need to provide “well-timed information” to help customers plan ahead when their current rate is due to end.
Some elements of the charter came into effect last month with borrowers not allowed to have their homes repossessed within 12 months of their first missed mortgage payment.
Homeowners can also approach their lenders for advice on repayments without impacting their credit score.
You should also be aware that you’ll need to be up to date with your repayments to be eligible for the help, as it doesn’t apply to those who have already fallen behind on their mortgage payments.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.
What if I need to remortgage?
Anyone with a fixed rate deal ending within the next six, should look into how much it would cost them to remortgage now – and consider locking into a new deal.
Most mortgage deals allow fees to be added to the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I am buying a home?
Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.
Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to higher mortgage rates limiting people’s borrowing ability.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to speak us.
You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.
Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to us as soon as possible, so we can help you find the right mortgage for you.
Source:Ruby Flanagan – Money Reporter
Fran Evans – This is Money