Bank of England figures published on 30 October 2023 confirmed that net approvals for remortgaging (which only captures remortgaging with a different lender) continued to fall from 25,100 in August, to 20,600 in September. This is the lowest level since January 1999, at 18,300.
This trend suggests many homeowners may be missing out on better deals by simply taking a new product with their existing lender, rather than looking at what’s available in the wider market. It could also be an indication of borrower concerns about affordability assessments and tighter lender criteria.
One benefit of using a mortgage adviser is that they can assess affordability before borrowers make a decision about whether to remain with an existing lender or apply to a new one, enabling them to consider the best rates available.
Where affordability is a concern, the Financial Conduct Authority (FCA) launched a Mortgage Charter in collaboration with the government and the UK’s largest mortgage lenders to help borrowers who are worried about higher interest rates.
At a glance
- In June, the FCA launched a Mortgage Charter to help borrowers who are worried about higher interest rates and may be facing financial difficulties.
- The Charter aims to provide some protection for mortgage holders by enabling lenders to offer swift, temporary reductions in payments, and for customers to make informed decisions.
- Wesleyan supports the Charter and its aim of helping mortgage holders who are experiencing financial difficulties or who could benefit from expert advice.
The Charter is voluntary for lenders, but the FCA expects them to follow it as best practice. The guidelines only apply to regulated residential mortgages and not to either buy-to-let or commercial mortgages.
It features a set of standards for lenders when helping their mortgage customers, including:
- Allowing customers to reduce capital repayments (including to zero and paying interest only) for up to six months without a new affordability assessment.
- Allowing customers to fully or partly reverse a term extension within six months of extending the term without a new affordability assessment.
- Providing customers with clear and timely information about their options and the implications of their choices.
- Contacting customers if they’re due to come to the end of an existing deal or if they’re in arrears to offer support and guidance.
- Treating customers fairly and sympathetically, only considering repossession as a last resort, and offering advice and options if they’re experiencing financial difficulties.
Ease your mortgage worries
With the Bank of England raising interest rates since the end of 2021 as a way to cool surging inflation, many mortgage holders have seen their monthly payments surge too.
The Mortgage Charter aims to help ease some of the difficulties by giving people flexibility to manage their repayments. For example:
- Borrowers could reduce their monthly payments by paying only the interest or a lower amount of capital for up to six months, without having to prove their income or expenses.
- Mortgage holders could extend their mortgage term to lower their monthly payments, and then reverse it within six months if their situation improves, without having to go through a new assessment.
In addition, lenders will be expected to provide their customers with timely information about the benefits and risks of different options. This includes how much interest they will pay in total, how their equity could change and options like securing a lower rate deal six months before their current one is due to end.
The Mortgage Charter is more of a last resort than a first option. It might be a useful way to buy some extra time while borrowers find a long-term solution rather than a temporary fix. Notably, if the options available under the Charter are used, they will increase both the total cost of the mortgage and the monthly payments when the feature comes to an end.
Find expert help
Wesleyan supports this initiative and the goal of helping borrowers with their mortgage needs. If you’re looking for a mortgage – whether you’re buying for the first time or moving to a new product – most of our recommendations are to providers who have signed up to the Mortgage Charter.
However, we’re not restricted to just these lenders. If we find a product from a provider that hasn’t signed the Charter, but it is the most suitable for you and your financial situation, we’ll still recommend it. You’ll then have the option of deciding what’s right for you.
We’re here to help if you have any questions about mortgages and connect you with our dedicated team of Mortgage Advisers. Contact your Specialist Financial Adviser from Wesleyan Financial Services if you’d like to talk about your mortgage or any other financial planning needs.
Your mortgage is secured on your home. Your home may be repossessed if you do not keep up repayments. Most buy-to-let mortgages are not regulated by the Financial Conduct Authority (FCA).