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Mortgage Charter addresses borrowers’ fears but does not help homeowners already in arrears

Yesterday the UK Government published the Mortgage Charter which aims to help homeowners who have seen interest rates steadily rise to 5% over the last 18 months.

27 June 2023
Stephen Morrison — Policy Coordinator
  • Mortgage

Yesterday, the UK Government published the Mortgage Charter. It aims to help homeowners who have seen interest rates steadily rise to 5% over the last 18 months.

Housing Rights believes that this charter represents a step in the right direction. However, it arguably doesn’t go far enough and fails to help the most vulnerable who are already experiencing severe affordability issues and may already be in arrears.

Low-income mortgage holders are already struggling

The impact of these rises has been particularly stark for homeowners on a tracker mortgage and is extremely concerning for those approaching the end of their term on a fixed-rate mortgage.

Recent analysis from the Institute of Fiscal Studies suggests that rising interest rates could mean 1.4 million mortgage holders lose 20% of their disposable income.

Most negatively impacted are low-income households. Joseph Rowntree Foundation research has found that almost three-quarters of low-income mortgage holders reported going without showers and food in the past month.

Through our advocacy and court representation services, Housing Rights sees that many homeowners are already struggling with interest rate rises over the past year. This comes alongside a relentless cost of living crisis which has seen food price inflation of over 10% and a spike in fuel costs meaning an unsustainable increase in the cost of maintaining a home, heating a home and feeding a household.

Mortgage Charter prevents catastrophe but does not fully address the crisis

Against this deeply worrying and uncertain backdrop, Housing Rights welcomes any support for mortgage holders who are struggling with rising payments or worried they may not be able to cope in the foreseeable future.

We welcome the commitment from lenders that customers have the chance to lock in a deal up to six months ahead of the end of their fixed-rate deal. They will also be able to manage their new deal and request a better like-for-like deal right up until their new term starts. We support the flexibility this offers mortgage owners to achieve the most affordable deal possible.

We also support the commitment permitting customers who are up to date with their payments to switch to interest-only payments for six months or extend their mortgage while allowing the option for the customer to revert to their original term within six months. This would provide relief for customers experiencing short-term affordability issues. Housing Rights emphasises the need, however, to ensure that customers are fully advised on the longer-term impacts of these options.

We welcome further clarity on the below statements in particular.

The Charter states: 

“From 26th June, a borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment.” 

Housing Rights welcomes this commitment, as a major safeguard against repossession should a mortgage holder fall into arrears following this date. However, we ask for clarification as to timelines and whether this safeguard applies to households who have missed their first payment before 26 June, as this may mean that anyone already in arrears due to successive interest rate rises cannot avail of this. 

“No further action will be taken if a possession order is granted from 26th June 2023.” 

We welcome this and ask for confirmation as to timelines and whether those who have Suspended Possession Orders already in place are also protected from eviction. 

Housing Rights asks for more protection for homeowners already in arrears 

We believe that by setting the date of 26 June, with no means of reassessing mortgage arrears from the past year, this Charter fails to recognise the scale of the crisis which has been unfolding. The most vulnerable, those who need assistance most and those already in arrears are afforded no additional help by this charter and remain subject to action up to and including repossession. 

Housing Rights proposes the following to address the concerns of those in most need. 

Key policy asks

1. Housing Rights first seeks clarification on whether the safeguards outlined in this charter will apply to mortgage owners who missed their first payment or have been in arrears before 26 June 2023. It is Housing Rights experience that it is the most vulnerable who are impacted most quickly by the affordability crisis, and therefore need the most help.

2. If this is not the case, Housing Rights asks that a plan of support, including protection against repossession, be put in place to protect those mortgage owners who missed their first payment or entered into arrears before 26 June 2023 due to rising interest rates.

3. Rising costs and unaffordability issues do not select based on lender, nor should mortgage holders be subject to fewer protections based on their lender. Housing Rights asks that mortgage lenders who have not signed up to the charter nonetheless adopt it as policy to give equality of protection to mortgage owners regardless of their lender.

Getting help and support with mortgage debt

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