Today the Financial Conduct Authority (FCA) has confirmed they will provide help for mortgage borrowers struggling with payments. The FCA will lay out final mortgage guidelines, which outline how mortgage lenders can assist customers who are concerned about or are already suffering with mortgage payments due to growing living costs.
Uswitch.com mortgage expert, Kellie Steed has shared her thoughts on this announcement and outlined some tips for homeowners who are struggling to keep up with their payments in light of the current financial crisis.
Kellie Steed, Uswitch.com mortgage expert said, “The Financial Conduct Authority (FCA) issued a warning to mortgage lenders back in January 2023 about the impact rising mortgage costs would have on borrowers. Following on from that, they have today issued lenders with final guidance, which reminds lenders of their obligation to support struggling borrowers and improve their treatment of those in financial difficulty, where applicable.
“This is promising news for people who are already, or expect to be looking to their mortgage lenders for support in the coming months. Although fewer than their previous analysis suggested, the FCA still expects that around 356,000 more mortgage borrowers could face payment difficulties by the end of June 2024.
“This is predominantly due to fixed mortgage deals with substantially lower interest rates ending, with comparable rates no longer available to those remortgaging in 2023. The FCA predicts that borrowers in these circumstances will pay up to an additional £340 per month on average once their mortgage deal ends.
“If you’re struggling with mortgage repayments or are concerned that you will begin to when your fixed-rate ends, here are my three top tips:
Speak to your lender as soon as possible
“The FCA has already helped encourage lenders in supporting over two million customers struggling with their mortgage repayments in the past year. Mortgage lenders can provide access to debt advice, as well as helpful budgeting tools and tailored forbearance planning – which looks at reducing or suspending your repayments in periods of severe financial difficulty.
Consider your mortgage options
“Although rates have risen sharply over the past 12 months, it’s still worth considering deals that other lenders may be able to offer, as opposed to staying with your current lender. An independent mortgage broker will be able to help you compare the deals available to you – sometimes even a 0.5% saving could be the difference between affordable repayments and breaking the budget.
“You could also discuss options with your existing lender, such as extending the mortgage term to reduce your monthly payments. Although bear in mind that this will result in you paying more interest over the life of the mortgage.
Don’t be afraid to ask for help
“The FCA defines mortgage borrowers as financially stretched if more than 30% of their gross household income is spent on mortgage payments and they are not in arrears. With the average borrower spending over a fifth of their income on mortgage payments as of 2022, and continued cost of living increases, many more people are likely to be defined as ‘financially stretched’ by the end of 2023 – so you’re certainly not alone if you begin to struggle
“According to an FCA survey, 47% of borrowers in financial difficulty believed that contacting lenders about mortgage repayment difficulties would impact their credit score. Whilst it’s true that mortgage payment holidays and reduced payments are likely to appear on your credit file, simply reaching out for help and advice from your lender does not carry this risk.
“If you’re concerned about your mortgage payments, debt charities like Citizens Advice, Shelter, National Debtline and StepChange, will all be well-placed to offer advice and guidance”.
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