FCA confirms help for mortgage borrowers struggling with payments

Any support that can be offered to people coming off their existing low rates now, at a time when energy rates have spiralled, mortgage payments have gone up and the cost of living has increased, will be most welcome. We saw similar measures during Covid where support was put in place to ease the burden for those that needed it most by taking a payment break with their mortgage. This meant that if were in financial difficulty, through situations that were not of your own making, you weren’t penalised.
The last thing lenders want is for homeowners to go into arrears or have to default on their mortgage. Most lenders will work with the homeowner to find a solution whether that’s lowering payments, extending terms or switching to interest only.

Whilst it is great that the FCA are promoting the important of borrowers speaking to lenders, I think it's never been more important to get a full financial appraisal from an adviser as a first port of call. The majority of my caseload this year has been looking at where finances are stretched and forming a plan to mitigate against the current increase in interest rates without affecting the long-term goals of a client. I'm constantly amazed by the amount of people still on Standard Variable Rates, and often a simple remortgage is putting them in a much better financial position to be able to weather the storm.

The FCA's analysis predicts those borrowers coming off a fixed rate mortgage deal could end up paying an additional £340 a month on average. But the key thing to note for homeowners is that talking to the lender before you miss a payment is crucial. Contacting your lender if you merely have concerns about making future payments won't affect your credit score. And they may be able to temporarily reduce the monthly payments, or extend the mortgage term.

Not everyone has an extra few hundred pounds lying around. It's great that the FCA is highlighting the importance of communicating with lenders when struggling. It'd be fantastic to see lenders proactively and regularly sending out communications as a reminder of what to do if you are struggling, or expect to struggle. Even making slight changes, such as increasing the mortgage term, could help as a short-term solution.

The first step for anyone struggling to meet mortgage payments is to speak to their lender at the earliest opportunity. Many people are under the mistaken impression that this impacts their credit file or makes the lender more likely to foreclose, which simply isn't true. The earlier you speak to your lender, typically the wider the range of options available. If you contact them after you start to default, the options will usually be far narrower.