- 12-Month Reprieve: Relief for Homeowners Facing Foreclosure
- Mortgage Assistance Agreement Reached with Banking Executives
- Concerns Raised Over Exclusion of Renters and Mandatory Implementation
Jeremy Hunt met with banking executives at Number 10 Downing Street to help mortgage holders as interest rates climb. Some of the measures are comparable to those implemented during the pandemic.
Amid skyrocketing interest rates, mortgage lenders and Chancellor Jeremy Hunt have agreed that homeowners should be granted a 12-month reprieve from foreclosure proceedings.
Following the base rate hike to 5%, Mr. Hunt met with Lloyds, NatWest, Barclays, and Virgin Money executives.
They concurred that a repossession pause, similar to the one implemented during COVID, should be implemented.
Mr. Hunt spoke after the Downing Street summit about an option for people who are struggling with repayments to go to their banks or lenders and discuss their options without it affecting their credit rating, although the Financial Conduct Authority (FCA) had mentioned this in March of this year.
Changes to repayment terms or interest-only programmes can be rescinded within six months without impacting credit scores.
Renters, who may lose their houses due to increased mortgage rates, were not offered support.
Labour said that the plan should be mandatory for all banks as the current deal covers 75% of the market. Approximately two million homeowners could be denied assistance.
The chancellor stated, “There are two groups of individuals about whom we are especially concerned.
“The first group consists of individuals who are in imminent danger of losing their residences due to delinquent mortgage payments.
Families with expiring fixed-rate mortgages worry about rising mortgage rates.
During the pandemic, similar repossession moratoriums were enacted.
Several hours later, the FCA released data indicating that 0.86 percent of residential mortgages were in arrears in the first quarter of 2023, compared to 3.32 percent in 2009 following the financial crisis.
The percentage of disposable income spent on mortgage payments has decreased to 5.4% from 10% in the 1990s.
Martin Lewis, the founder of MoneySavingExpert.com, stated: “I met with the chancellor on Wednesday and reiterated that the bare minimum we needed was to ensure that when people asked for assistance from lenders, they knew that if things changed, it wouldn’t be detrimental to their financial situation and that their credit scores would be protected as much as possible.
“I’m glad the chancellor listened and the banks would implement these measures. We must ensure that everyone is aware of their rights if they are experiencing difficulties with their mortgage so that they feel comfortable communicating with their lender and comprehend the measures they can request for assistance.”
Banking leaders also voiced their support for the measures, with HSBC CEO Ian Stuart stating, “It’s important that customers feel comfortable contacting us if they feel they’re getting into financial difficulty because although every customer’s situation is unique, we have a variety of options that we can use to help them find a way through.
Sir Keir Starmer, Labour Party leader, said the public wanted “actions, not words” on mortgages.
He stated that “many mortgage holders, many families, are now even more concerned about paying their mortgage” across the nation.
He stated, They know the government has existed for 13 years and pushed the economy down last year.
“I believe that what they want is a much stronger sense that the government is in control; actions, not words.”
Rachel Reeves, the shadow chancellor, also criticized “the government’s failure to make these measures mandatory” and “the lack of clarity and certainty regarding the timelines.
She stated that the Conservatives should “take responsibility” and implement Labour’s Thursday-announced plan. Which would require all banks to permit borrowers to switch to interest-only mortgage payments and extend the term of their mortgage.
However, a Treasury spokesperson stated, “Today’s measures will provide reassurance to those who are concerned about elevated interest rates and assistance to those who do experience financial difficulty.
“The chancellor expects smaller lenders to join and offer clients equal flexibility. He thinks this is right, and we know some of them will examine it in the coming weeks.”
