The Financial Conduct Authority (FCA) has offered guidance to lenders to offer greater support to borrowers struggling with mortgage repayments.
The Household Finance Review for Q3 revealed that following inflation and interest rate rises people with fixed rate mortgages could face significant financial difficulties. This could impact 1.8 million households.
It was also revealed that there are signs of stress in unsecured borrowing in households with an expected upturn in the number of people going into arrears. These findings have prompted lenders to offer greater support to homeowners struggling with their repayments, following a meeting with chancellor Jeremy Hunt, consumer advisor Martin Lewis, and the FCA.
The FCA has set out a number of ways lenders can support borrowers struggling with mortgage repayments such as offering prospective forbearance to consumers to avoid, reduce, or manage any payment shortfall that would otherwise arise, offering contract variations without assessing affordability and which allows consumers to extend their mortgage or pay back on an interest-only basis, and providing borrowers greater flexibility and advice when providing a mortgage. The full report can be seen here.
The FCA have advised that making changes, even temporary ones, may result in higher monthly payments in future, or paying back more overall. Mortgage borrowers should consider carefully any steps they take and customers who can keep up with their payments should continue to do so.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:
“Most borrowers are able to keep up with their mortgage payments and should continue to do so. But if you’re struggling to pay your mortgage, or are worried you might, you don’t need to struggle alone. Your lender has a range of tools available to help, so you should contact them as soon as possible.
If you’re struggling to pay your mortgage, or are worried you might, you don’t need to struggle alone. Your lender has a range of tools available to help, so you should contact them as soon as possible.”
Richard Pike, Phoebus Software chief sales and marketing officer, stated:
“Seeing that early arrears were on the rise is a note of caution for lenders to be prepared going into 2023. They will not only need staff on the ground to assist borrowers, but they will also need all their systems in place to detect early signs of borrowers in difficulty. Without the proper back-office technology the process of early detection and intervention is more difficult and potentially damaging down the line. It’s a case now of being prepared.”
HM Treasury have also announced it will make Support for Mortgage Interest easier to access.
