The chancellor Rachel Reeves has brought together the six largest banks and building societies to secure a commitment they will support customers coming to the end of fixed term mortgage deals, as rates rise following the global uncertainty caused by the conflict in Iran.
In a unanimous 9-0 vote by the Bank of England’s monetary policy committee, interest rates were held last week amid fears inflation will increase and the bank will be forced to increase interest rates to try and keep it in check. In his comments following the decision, the governor of the Bank of England AndreW Bailey said it was appropriate to hold rates at this time, and that he “will be monitoring developments extremely closely and stand ready to act as necessary to ensure that inflation remains on track to meet the 2% target in the medium term.”
Lenders have reacted in the last week by increasing mortgage rates swiftly. Data from Moneyfacts shows the average mortgage rate at the end of February was 4.9%. Last week that had risen to 5.42% and this week it is 5.58%.
In a meeting with lenders, the chancellor said she had secured a commitment to proactively contact 1.6 million customers whose fixed-rate deals end between now and the end of the year. This will set out customers’ options or how to access bespoke support well before the payment changes.
Those present reaffirmed their adherence to the Mortgage Charter which enables customers to book a new rate up to six months ahead and switch to a new deal with their existing lender without a fresh affordability check, and offers temporary breathing space, including a move to interest-only payments for six months, with support discussions not affecting credit scores.
Lender say around 86% of mortgages are on fixed rates and most borrowers are not under immediate pressure from short-term market moves, but acknowledged more customers are getting in touch for guidance.
Chancellor of the Exchequer Rachel Reeves said:
“In uncertain times, people need clear reassurance and practical help. That’s why I’ve brought the biggest lenders together to step up support and make sure anyone who is worried can access the Mortgage Charter options quickly, without their credit score being affected.”
