Relief at last as Hunt mortgage help shields owners from repossessions | Personal Finance | Finance
Jeremy Hunt ends expensive mortgage help for homeowners
Chancellor Jeremy Hunt has struck a deal with banks to help millions hit by “unprecedented” mortgage rises hold on to their homes.
It means people plagued by rising bills can switch to interest-only mortgages or extend their loans – and then go back to their original deal within six months.
They will also be able to get help without being penalized by taking a hit to their credit score.
The new ‘mortgage charter’ also prevents houses from being repossessed without consent in the twelve months after the first payment is missed.
It came after he summoned lenders to Downing Street, urging them to offer more support to struggling families.
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Jeremy Hunt to help mortgage holders
Mr Hunt said the new measures announced by the Treasury should “bring comfort to those worried about high interest rates”.
After meeting the heads of HSBC, Santander and Barclays among others, the chancellor declared yesterday: “These measures should bring comfort to those worried about high interest rates and support those struggling.
“Tackling high inflation is the Prime Minister’s and my main priority. We are fully committed to supporting the Bank of England to do what it needs to do. We know the pressure on families. That’s why we introduced large support packages of around £3,000 for the average family this year and last year.
“But we will do what has to be done, and we will not be resolute because we know that removing high inflation from our economy is the only way we can finally ease the pressure on household and business finances west.”
Mr Hunt described measures allowing households to switch to interest-only deals or extend their terms as “a powerful new tool for managing their monthly budgets.”
The measures will come into effect within two weeks as concerns over Bank of England interest rates rise to five per cent.
Andrew Bailey, governor of the Bank of England
Market traders yesterday predicted that interest rates could peak at 6.25 percent, further hitting household finances.
The Bank of England is struggling to bring inflation under control after being accused of doing “too little, too late” to control rising prices.
Mr Hunt admitted that the Government is “particularly concerned” about people who are at risk of losing their homes because they will fall behind on their mortgage payments and those who are about to see their bills plummet as their fixed deals come to an end.
Under the new mortgage charter, repossessions will not start until 12 months after the first payments.
Previously, lenders would consider taking action if homeowners missed three payments. And to avoid falling into financial disarray and losing their home, people can switch to interest-only mortgages without bumping their credit score.
They will get help from banks or building societies without being penalized.
Personal finance guru Martin Lewis said: “The unprecedented sharp rise in mortgage rates is causing a nightmare for many people with variable mortgages and those running out of solutions.
“Therefore, the most important thing we can focus on at the moment is suitable and flexible measures of standing. While the Bank of England aims to squeeze people’s disposable incomes, nobody wants people’s lives ruined by arrears and repossessions – and that is the urgent protection we need to focus on.
“I met the chancellor on Wednesday and reiterated that the minimum we wanted was to make sure that when people asked for help from lenders, they knew that if things changed it wouldn’t be detrimental their financial situation and that their credit scores would be protected. as much as possible.
“I am pleased to see that it appears that the Chancellor has listened and that these measures will be implemented by the banks. We need to make sure that everyone knows their rights if they are in trouble with their mortgage, so they can feel comfortable talking to their lender and understand what steps they can take to get help.”
Bank of England Governor Andrew Bailey admitted on Thursday that the 13th consecutive rise in rates from December 2021 would cause “difficulty and pain” for many. Those with loans would be “understandably worried”, he said.
The average two-year fixed rate mortgage has increased to 6.19 per cent, while the five-year rate has risen to 5.82 per cent, according to financial data firm Moneyfacts. In June of last year those rates were closer to 3 percent.
Personal finance guru Martin Lewis
Rising interest rates can reduce spending in the economy by boosting the incentive to save money.
Alice Haine, personal finance analyst at Bestinvest, said: “All these measures help, but they do not end the anxiety for millions of borrowers who are now thinking carefully about how their finances will cope in the months and in the coming years.
“Whether it’s a first-time buyer looking to get a foot on the property ladder or someone re-mortgaging in the next 12 months, or even in three years’ time, mortgage costs are at the top of the list of financial worries for many.
“The reality of rising interest rates, and correspondingly much higher mortgage rates, is that people have to cut back their spending significantly to ensure they can afford to get on the property ladder in the first place go down or have enough money to pay higher repayments as. as well as their other daily bills.
“This will require a serious adjustment in spending behavior at a time when households may be faced with falling property prices and a general perception that their wealth is diminishing.”
But the Government faced fresh anger yesterday over its failure to protect renters from landlords facing bills after rising interest rates.
Tom Darling, campaign manager at the Tenant Reform Alliance, said: “The Government is moving very quickly on mortgage holders, a constituency they consider to be electorally important.
“Meanwhile, we’ve had to wait 4 years for the Tenants (Amendment) Bill, and it seems to have lapsed shortly after it was published.
“Our proposal to include a guided cap on rent increases in the Bill would stop the use of unaffordable rent increases to evict tenants, and together with this the Government could tackle the affordability crisis rent by freezing housing benefit and building many more. social housing.”
Banks and building societies were also criticized yesterday for failing to offer higher interest rates to savers.
Mr Lewis said: “They are increasing borrowing, but they are not increasing saving by the same amount. That seems very scary to me, because when the banks were struggling in 2007/2008, we, the state, the taxpayer, bailed them out.
“We, the state, the taxpayer are struggling right now. They should be doing what they can to compensate, because they are too big to fail and, now, they don’t want us to fail. They should be doing everything they can to compensate.”
Thirteenth time lucky? On Thursday, to curb inflation, the Bank of England did what it has done for more than a year and increased the base rate by half a percentage point, to five percent.
In the run up to the hike, lenders were pulling mortgage deals from the market only to return at much higher rates. The market average for a two-year fixed-rate mortgage rose by six per cent for the first time since December.
Historically, a six percent rate may not seem that high. Those of a certain vintage will have a point
until the early 1990s, where the average rate hovered around
But the most important thing to remember right now – and the reason a higher base rate is a cause for concern – is that, because wages haven’t kept up with inflation, mortgage repayments are much higher than earnings.
Throw in the added cost of food and energy bills and there are serious concerns about how mortgage holders who are nearing the end of their fixed rate deals or are on tracker or standard variable rate markets will fare. So if that’s you – what are your options? The first thing to do is talk to your lender. The support available includes a temporary break from payments, switching to interest-only payments or extending the term of your mortgage.
If you’re getting out of your fixed-term deal within six months, check what your lender can offer and talk to an independent mortgage broker too.
You can certainly do better than your current lenders standard rate. It can take weeks to arrange a remortgage, so don’t leave it too late.
The Financial Conduct Authority has already had to write to banks reminding them of their obligations to provide tailored customer support.
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