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Britain’s mortgage lenders have agreed to take a more consistent and supportive approach to homeowners struggling with the cost of living crisis, with the Treasury meeting with Chancellor Jeremy Hunt and the move attended by consumer champion Martin Lewis.
“We expect every lender to live up to their responsibilities and support any mortgage borrowers who are struggling right now,” Hunt said Wednesday after a roundtable with executives from the nation’s largest banks.
At the same time, the UK Financial Conduct Authority, the financial watchdog, published draft guidance outlining key support mechanisms for consumers, including forbearance programs introduced at the start of the Covid-19 pandemic.
Bankers also recommitted to giving borrowers the chance to move to a fixed-rate mortgage, without affordability tests, after their current deal ends if their payments are up to date.
The chancellor is concerned that there are wide variations in how different banks treat customers facing financial difficulties, an issue consistently highlighted by journalist and campaigner Lewis.
Hunt warned lenders to do everything possible to help vulnerable consumers in the difficult months ahead.
Lewis previously warned that a “perfect storm” is heading for homeowners in the spring, as rising energy prices, double-digit inflation and interest rates forecast to rise above 4 percent next year make repayments unaffordable.
Data from the Bank of England shows that a third of borrowers on fixed-rate deals will have to refinance over the next two years – the equivalent of millions of homes every month – at much higher rates. Earlier this year, the average rate on a five-year fixed deal more than doubled to more than 6 percent.
Additionally, the Office for Budget Responsibility fiscal watchdog said last week that home prices are forecast to fall 9 percent over the next two years and could remain below their current levels for up to five years.
In a separate statement, the FCA has set out various mechanisms through which banks can provide relief to customers. These include extending the mortgage term, switching to interest-only payments for a temporary period, moving customers to a different interest rate or allowing them to reduce monthly payments.
The FCA will allow banks to use automation to “provide forbearance at scale” and proactively identify similar groups of borrowers who could benefit from the same mechanism of relief.
The regulator said it recognizes the need for “flexibility and scope to tailor their approach to meet the operational challenge of many clients needing help at the same time”.
“If you’re struggling to pay your mortgage, or you’re worried, you don’t have to struggle alone. Your lender has lots of tools available to help, so you should contact them as soon as possible,” the FCA said. said Sheldon Mills, executive director of consumer and competition at
Banks have to respond to the proposals by December 21.
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