Mortgage charter

Many lenders would follow similar solutions to those in the charter already, so it is not an entirely new set of remedies. The major benefit is probably the lack of damage to a borrower's credit file - that's everyone's fear, as a payment arrangement for a few months could affect credit availability, and cost, for 6 years.

I think we will need to see 12 months interest-only as an option, 6 months seems too short and not enough time to ride out the rate storm, given the words of BofE Chief Andrew Bailey this week.

I would ask lenders to look at their product choices, and see if they could provide options such as 1 yr products, flexible products so clients can remortgage or change early when rates fall without penalty, and dare I ask, some higher fee / lower rate products where the choice to add a larger product fee to the mortgage but maintain reasonable monthly payments - similar to those found in the Buy to Let market. They have a place for certain clients and the right advice.

Most lenders will allow product transfers up to 6mths ahead of time and mortgages offer validity of 6mths and also allow changes if rates come down. Extending the term and converting to interest only, whilst loosely helps the mortgage holder, it is just kicking the can down the road. Interest only will not pay off any of the balance- this will have little effect to those on longer terms. Payment deferrals will also add the payments to the overall balance. All of these solutions will actually increase what the mortgage holders pay in the long run. Also, this could tip some into an even worse product than what they could have had when they come to refinance or change products if they tip into the next loan to value bracket due to the increase in balance. As brokers, we saw this with the Covid payment holidays.

The mortgage charter is more of a band-aid than a fix. It is geared at reducing the cost of mortgage payments for those that can not afford it without it impacting their credit report. There are two major issues with this. The first is that it completely counteracts the aim of reducing inflation, we are freeing up disposable income for people to continue spending, which will surely lead to prolonged high inflation and high-interest rates, secondly, this was allowed during the lockdown and this scheme was severely abused. People who did not need to take payment holidays still took them as they were doing so on an unadvised basis and thought it was free cash. Both the BOE and Government appear to be heading in different directions during this crisis and it is a complete farce. I can only see a mammoth economic car crash being the outcome. If ever there was a living example of smoke and mirrors, this charter is it.