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Confusion over the government's Mortgage Charter

Journalist: Tom Dunstan, FTAdviser

ended 26. July 2023

Lenders have interpreted the government's mortgage charter in different ways. Specifically, the provision: “customers approaching the end of a fixed-rate deal will have the chance to lock in a deal up to six months ahead”, has been implemented in a variety of ways due to the phrase “up to six months ahead”. This has led to lenders like Santander and Halifax offering this option 6 months in advance whilst lenders like Virgin Money, Coventry Building Society and Scottish Widows offering it 4 months before.

What is your reaction to this inconsistency? Has this caused any confusion in your experience? Could this be harmful to borrowers or brokers? 

7 responses from the Newspage community

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Darryl Dhoffer
Founder at The Mortgage Geezer
With regards to the Mortgage Charter, lenders are not obliged for clients to lock in a deal 6m ahead - it's "within" 6m so brokers should know what lenders are offering what deals, and how long. My only confusion is TSB offers, their Buy To Let customers they have -the ability to switch to Interest Only for 6m - thought this was for Residential Mortgages only, and surely many Buy To Let clients are already on Interest Only anyway
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Like all government initiatives and policies, it provides a good PR headline but lacks the detail and substance to make any real difference. The only tangible differentials are the hold on repossessions and arrangements with lenders for up to 6 months not affecting borrowers' credit ratings.

Most lenders were already offering interest only, term extensions and working with borrowers in financial distress.

The product transfer timelines are vague and have been left open to interpretation. With it stating up to six months, those offering 4 months are not outside the policy, but perhaps not being as helpful to their clients as they could be.

If every lender offered product transfers and remortgage offers 6 months before completion, homeowners can plan with certainty early and still have the flexibility to change if over the 6 months rates improve.
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Justin Moy
Managing Director at EHF Mortgages
Not every lender can provide the 6 months we would love to see, mainly due to IT restrictions and the cost of change in the short term. However, the charter was written in a way that lenders who couldn't facilitate that requirement, so I don't think it is inconsistent, there is scope for lenders to set some parameters that they can work to, but it also creates opportunity for remortgages if there is a need to take an early deal to reserve rates.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
It comes as absolutely no surprise to anyone who has been paying attention that lenders, when invited by the government to write their own rules, would do it with the non-commital language of "up to" instead of the enforceable "from".
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
This is unfortunately what happens when things are rushed through without proper consultation with market participants; things like this get missed and cause issues. Normally, when a change of rules is proposed, a consultation document is issued to the key players in the market and views and opinions are gathered before making any final rules, it is this process that allows potential problems like this to be spotted and resolved. Trade bodies, such as AMI, spend a huge amount of time and resources going over this sort of thing and challenging around points just like this one, meaning that when the final rules are released, they are more likely to be consistent and less likely to contain issues around the interpretation of wording as we see here.
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Russell Maggs
Mortgage & Protection Adviser at Maggs Financial Services
The Mortgage Charter is just party politics headlines. Much of what is contained within the charter was available to mortgage holders already and whilst there are a few items that will help the most vulnerable in society, the government should be focusing on bringing down the cost of living rather than playing politics with peoples mortgages.
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Gary Bush
Financial Adviser at MortgageShop.com
It's clear that the UK finance industry still likes to wriggle around in the small print - the government gave them some flexibility in words and some lenders have taken it and done absolutely nothing beyond what they were already doing. It's a sad state of affairs: "up to 6 months".