Unlocking the Benefits of the Mortgage Charter: A Guide for Homeowners

Unlocking the Benefits of the Mortgage Charter: A Guide for Homeowners

It’s been nearly three months since the government, in collaboration with lenders and regulatory bodies, introduced the Mortgage Charter. But what exactly is this charter, and how does it impact homeowners? Let’s dive into the details.

The Mortgage Charter Explained

The Mortgage Charter serves as an agreement between the government and mortgage lenders, outlining a set of standards designed to support customers. This initiative was crafted in response to the significant surge in mortgage interest rates since 2021, offering relief and flexibility to borrowers. The key components of the Mortgage Charter include:

1. More Flexible Mortgage Terms: Borrowers gain the flexibility to switch to interest-only payments for a period of six months and extend their mortgage term temporarily to reduce their monthly payments. This extension can be reversed within six months if needed. What’s more, affordability checks are not mandatory for borrowers switching mortgage products.
2. Re-mortgage Support: Homeowners can negotiate a new rate with their lender six months before their existing product expires. This enables customers to request a better deal from their lender, if available, up to two weeks before the new term begins.
3. Repossession Rules Eased: To provide breathing space for borrowers facing financial difficulties, the Mortgage Charter has significantly extended the timeline before a home can be repossessed due to arrears. Except in exceptional circumstances, a borrower will not face home repossession for at least 12 months after falling into arrears. Previously, lenders could initiate proceedings after just three months.

 Click here to Book a free appointment with our mortgage advisor who can visit you in our Chorley office or at your home.

Points to Consider When Seeking Support – Unlocking the Benefits of the Mortgage Charter: A Guide for Homeowners

While the Mortgage Charter addresses critical issues, borrowers need to be aware of the potential risks associated with taking advantage of this support. The support is primarily short-term, lasting for an initial six-month period. Borrowers should understand that any changes, even temporary ones like extending the mortgage term or switching to interest-only payments, could lead to higher monthly payments in the future or a greater overall repayment.

Click here to see which borrowers have signed up for the charter

Exploring Options for Borrowers – Unlocking the Benefits of the Mortgage Charter: A Guide for Homeowners

The constant rise in interest rates has undeniably affected many borrowers, especially those with variable interest rates or whose mortgage terms have ended. While the Mortgage Charter primarily targets the most vulnerable borrowers, a significant portion of homeowners will still feel the financial strain of increased monthly mortgage payments.

The average homeowner re-mortgaging over the last twelve months had around a 50% loan-to-value ratio. This indicates homeowners have considerable equity in their homes. Lenders have around 10% ‘owner-occupier mortgages’ on their books with loan-to-value rates greater than 75%, compared to around 25% before the 2008 financial crisis. Taken together, this puts the market in a significantly stronger position than before.

Interestingly, one aspect that hasn’t received much attention is seeking independent mortgage advice. A reputable, fee-free mortgage adviser can thoroughly assess your financial situation and recommend the most cost-effective lender tailored to your specific needs from the entire mortgage market.

But it doesn’t end there. An independent mortgage adviser can work with you to create a forward borrowing plan, considering the medium-term outlook and the potential stability of interest rates. With around 100 lenders in the UK, relying on an independent adviser can ensure that your current lender offers the lowest cost option and essential ongoing support in an ever-changing market.

 Click here to Book a free appointment with our mortgage advisor who can visit you in our Chorley office or at your home.

Unlocking the Benefits of the Mortgage Charter: A Guide for Homeowners – Conclusion

In conclusion, the Mortgage Charter brings much-needed support to homeowners facing the challenges of rising interest rates. Still, it’s crucial to weigh the short-term benefits against potential long-term consequences. Seeking independent mortgage advice can be a smart move to secure the best possible financial future for your home.

CLICK HERE TO READ THE FULL UK GOVERNMENT POLICY PAPER

If you are thinking of selling contact us for a free property valuation sales@redrose.co.uk