Mortgage lenders should support struggling customers in a range of ways that suit their needs, the City regulator has said.
The Financial Conduct Authority (FCA) has published guidance setting out options that firms can use to support their customers to manage their monthly mortgage payments amid the cost-of-living squeeze.
It is seeking comments on the draft guidance by December 21 2022.
The FCA’s draft guidance sets out the flexibility that firms have to support customers who have missed monthly mortgage payments or are worried they may not be able to make payments in future.
It covers options including extending the term of the mortgage, switching to interest-only for a temporary period, moving to a different interest rate or making reduced monthly payments for a temporary period.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Most borrowers are able to keep up with their mortgage payments and should continue to do so.
“But if you’re struggling to pay your mortgage, or are worried you might, you don’t need to struggle alone. Your lender has a range of tools available to help, so you should contact them as soon as possible.”
Making changes, even temporary ones, may result in higher monthly payments in future or paying back more overall. Mortgage borrowers should consider carefully any steps they take and customers who can keep up with their payments should continue to do so, the regulator said.
The FCA attended a roundtable, hosted by the UK Government, alongside mortgage lenders to discuss what support some mortgage borrowers may need.
It said it is closely monitoring the mortgage market and will continue to act so consumers get the support they need.
The Treasury said Chancellor Jeremy Hunt had met banking CEOs, along with consumer champion Martin Lewis and the FCA on Wednesday.
The banking CEOs, who cover more than 70% of the market, recommitted to protect mortgage holders by enabling them to switch to a new fixed rate mortgage, without a new affordability test, when their current deal ends if consumers are up to date with their payments. This covers 97% of the market.
Mortgage lenders should also provide customers with well-timed information ahead of any change to rates and offer specific help to those who start to struggle with payments.
Lenders should also ensure that highly trained and experienced staff are on hand to help.
Mr Hunt said: “We expect every lender to live up to their responsibilities and support any mortgage borrowers who are finding it tough right now.”
MoneySavingExpert.com founder Mr Lewis said: “The major concern for people’s mortgages – and the knock-on impact of mortgage increases on rents – is the situation in the spring, when we expect interest rates to be higher, energy prices to be rising, and other cost-of-living impacts.
“So the most important thing is that now the conversations have started about what flexibility and forbearance measures can be put in place to help those struggling.
“The commitments today set a good direction, and after helpful conversations I’m hopeful that further progress will be made. For those worried about making mortgage repayments, the sooner you communicate with your lender the better.”
Anyone who is struggling financially can visit the Government-backed MoneyHelper service for money tips.