The Mortgage Charter explained: Will it lower my repayments?

The Mortgage Charter doesn’t include financial support for those struggling to keep up with their repayments.  

Yesterday, the Treasury launched the Mortgage Charter, a set of standards aimed to help those worried by rising interest rates.

The charter was implemented after Chancellor Jeremy Hunt met with the country’s principal mortgage lenders, the Financial Conduct Authority (FCA), and UK Finance on Friday.

“These measures should offer comfort to those who are anxious about the impact of high interest rates on their mortgages,” Hunt said in parliament.

He also said it should provide support for those who do get into financial difficulty.

The Mortgage Charter doesn’t include any financial support for those impacted by rising interest rates. Instead, it relies on other measures which can be taken by both lenders and borrowers.

For borrowers, this includes speaking to their lender for information and support without it impacting their credit score.

“Anyone who is worried about their finances should contact their lender to find out what options are available to help,” said David Postings, CEO at UK Finance.

The rest of the Mortgage Charter focuses on what lenders can offer their customers. One of the measures includes allowing borrowers to switch to an interest only mortgage or extend their mortgage term to reduce their repayments.

In addition, from 10 July existing customers will also be able to lock into a deal up to six months ahead. In the interim, borrowers can request a better like-for-like deal if it is available.

The Mortgage Charter comes at a time when the average two year fixed deal sits above 6%.

Today it stands at 6.26% and was last higher in November, when it rose after the mini-Budget.

The average five year deal is also approaching the 6% mark and now stands at 5.87%. In comparison, it sat at 5.72% last week.

Over 30 lenders, which are responsible for 85% of the market, have signed the Mortgage Charter.

“We give our full backing to this charter. It will give borrowers facing financial difficulty even more reassurance that we’ll stand by them,” said Richard Fearon, Chief Executive at Leeds BS.

Other lenders which have signed the Charter include:

• Barclays
• Natwest, including RBS and Ulster Bank
• Lloyds, including Halifax and Scottish Widows
• Nationwide Building Society
• HSBC, including first direct
• Santander
• Virgin Money, including Clydesdale Bank and Yorkshire Bank
• TSB
• Scottish Building Society
• Buckinghamshire Building Society
• Newcastle Building Society
• Hinkley & Rugby Building Society
• Nottingham Building Society
• Principality Building Society
• Suffolk Building Society
• West Bromwich Building Society
• Loughborough Building Society
• Family Building Society
• Coventry Building Society
• Yorkshire Building Society
• Skipton Building Society
• Bath Building Society
• Ecology Building Society
• The Vernon Building Society
• Leek Building Society
• Furness Building Society
• Melton Mowbray Building Society
• Glasgow Credit Union
• Darlington Building Society
• Progressive Building Society
• The Co-operative Bank, including Platform and Britannia