Need help with your mortgage? You’ll have to wait: Lenders scramble to implement relief measures and admit help could take weeks to arrive
- The government has announced a package of measures to help mortgage holders
- Full details of the relief measures have yet to be confirmed, leaving many in the dark
- Interest rates have risen sharply in recent weeks, putting borrowers at risk
Mortgage holders who want to use the aid announced by the Chancellor on Friday will have to wait weeks for the measures to take effect.
The government and mortgage lenders have announced a package to help borrowers with rising costs, including repossession protection for one year and the chance to move to an interest-only deal for six months without impacting credit scores.
However, lenders are struggling to get to grips with the details of the new mortgage deedleaving mortgage holders in the dark.
Mortgage holders and brokers are waiting for details about how the measures will work in practice
Callers trying to reach Santander or Virgin Money to discuss their mortgage are met with pre-recorded messages confirming that the banks are still working on the details of the relief package and should check online for updates.
Virgin Money’s message reads: “We don’t have specific information at this time, but more information will be posted on the website as it becomes available.”
A spokesman for Santander told This is Money: “We will work out the details of the initiatives outlined as soon as possible so that we can introduce the new measures in the coming weeks.”
Lloyds, HSBC and Barclays are also among the lenders who have reached an agreement with the government to provide more support to borrowers.
In total, the group accounts for approximately 85 percent of the total UK mortgage market.
The measures were announced following a meeting between Chancellor Jeremy Hunt and mortgage lenders in response to growing calls to help borrowers.
In addition to switching to an interest-only loan, mortgage holders will also have the option of extending the term of their mortgage, for example from 25 years to 30 years, by a maximum of six months in order to reduce their monthly costs. This does not affect their credit score.
However, these changes do have consequences.
By switching to an interest-only mortgage, even for a short period of time, the borrower has less time to pay back the mortgage balance once he switches again.
As a result, more interest will have to be paid each month to make up for the missed time.
Sabrina Hall, Mortgage Adviser at Kind Finance in Lichfield, said: ‘As is often the case with these sorts of support schemes, the devil is in the details which we haven’t had until now.
“Most people are waiting for a little more detail on things, that in itself creates a problem, there will be people who won’t take action until the details get out, but in the meantime rates will go up.
“I’d rather they say ‘remarkable’ and then come out with the details
“If we have to wait weeks without knowing what’s available, I’ll have a client say ‘we should go with a lender on the list’ but that may not be the right choice for the client” or say “should we wait to get to another rate in case we can get help?’
Under the Treasury’s new mortgage charter, lenders who have signed up will have to update the government on progress in implementing the changes by June 30. The FCA also supports the group in its implementation.
Last week, the Bank of England raised its base rate to 5 percent for the 13th consecutive time since December 2021. It is now at the highest level since April 2008.
Chancellor Jeremy Hutn has held talks with mortgage lenders to put together a package that will help mortgage holders amid continued market volatility
The average two-year fixed-rate mortgage rose from 6.19 percent on Friday to 6.23 percent on Monday. It just topped 6 percent for the first time this year just a week ago.
For those with a larger down payment, rates are lower with the average rate for a down payment of 40 percent at 6.23 percent. With a down payment of 25 percent, that is 6.14 percent.
For a contract with a fixed interest rate of five years, the average interest rate is now 5.86 percent.
Many mortgage lenders raised interest rates on their fixed deals last week as the cost of borrowing rises.
About 1.4 million fixed rate mortgage holders will need to take out a new mortgage this year and will face a mortgage shock as they take out much higher rates than their current loan.
Those on floating and trailing rates will see their costs rise faster now that Santander and Natwest confirm they will rise from August in line with the central bank’s 0.5 percent increase.