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Banks agree to extra flexibility for borrowers

ended 23. June 2023

Following this morning's meeting between the Chancellor and major banks and building societies, the latter have agreed to be more flexible with borrowers to help them through the current crisis. UK newswire, Newspage, asked brokers for their views, below.

8 responses from the Newspage community

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Darryl Dhoffer
Founder at The Mortgage Geezer
About as much use as an inflatable pincushion, that meeting was. A repossesion grace period of 12 months is in fact already in place, along with a 6-month interest-only payment period, which again is already a tool at lenders' disposal. These are short-term and short-sighted offerings for clients that have taken out 5-year fixed rate deals in the past 12 months. How is 6 months' relief going to help? What should have been put on the table is the following: a minimum 6-12 months of interest-only payments allowed, and, of recent fixed rate deals taken, the ability to remain on interest-only until the end of the fixed rate period, with all deals catering for part-repayment and part-interest only. Also standardising lenders' variable rates for all high street lenders, which only tracks 0.5% above Bank Of England base rate, until the target of 2% inflation is met. Hard to see how this announcement helps borrowers, and let's be honest they have had months to get their acts together.
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Hannah Bashford
Director at Model Financial Solutions
This will be welcome news for some people who are worried about affordability coming off of a low rate onto something much higher. However, this is only a short-term solution because people's debt remains and interest rates may remain high. In that sense, it is more of a sticking plaster, not a cure. Ultimately this is kicking the problem down the road and should not be seen as an easy option to increase disposable income as the debt will remain and people still need a plan to pay it off. Speaking to an adviser before you get into difficulty is key to long-term financial security.
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Matthew Jackson
Director at Mint FS
This is like using a water pistol to put out a fire. Utterly pointless. It will not do a thing to help, as lenders will set the criteria themselves to allow the client to move to interest-only and then amend future payments to catch up the shortfall. And to top it all off, although it will not be registered as mortgage arrears, it will be seen by lenders in the future making it harder to obtain finance. Which means no one will want to do it. If Carlsberg did pointless meetings....
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Justin Moy
Managing Director at EHF Mortgages
This is probably the best we will get from lenders and the government, and will undoubtedly help many worried mortgage holders. The cost is still with the homeowner, but at least the important part is trying to afford the monthly cost at this time. We need clear instructions from lenders about the mortgage adviser's role in all this. For example, are we going to be able to swap to interest-only or lengthen mortgage terms at the same time as rate switching? With around 80% of all mortgages taken through a mortgage broker, I hope we have good involvement in this, for the sake of our clients.
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Riz Malik
Independent Financial Adviser at R3 Wealth
This is a promising start, however, there is still a considerable amount of work that needs to be done. It's essential to establish an autonomous Mortgage Task Force to vigilantly supervise the mortgage industry amid these economic fluctuations. It's crucial for borrowers to gain confidence that taking these options will not hamper their prospective choices, now or in the future.
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Elliott Culley
Director at Switch Mortgage Finance
Good to see flexibility from banks and it is always welcome for people struggling. However it would seem there is only so much banks can do to help, and I wonder if this really will help clients in the long term. For example, if a client has locked into a rate for 2, 3 or 5 years and asks for this help, it can only be provided for 6 months. So although this would give some initial relief, they would have to return to their initial mortgage terms, so this strategy may just be kicking the can down the road.
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Luke Thompson
Director at PAB Wealth Management
This will potentially offer some respite to borrowers. But, seeing as the large majority of monthly payments for those on repayment mortgages is made up of interest, especially in the early years of a mortgage, it will not give as much assistance as some may have thought it would. In addition for those who have fixed their rate at a high rate now, the same issue will still be there for them in six months' time. My assumption would also be that any part of the 'repayment' section of the mortgage would continue to accrue further interest during the period where only the interest is being serviced by the customer.
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Gareth Davies
Director at South Coast Mortgage Services
Innovation and measures to help the public are always welcome, although I can’t help but feel that today's announcement is similar to my wife’s favourite game show. Pointless. Going interest-only for 6-months is just papering over the ever-growing cracks. No doubt it will be seen by future lenders that people chose it, and the payments after the six months will be restructured and likely increase even more.