The Financial Conduct Authority has published its final mortgage guidance for lenders, setting out how they should support customers who are struggling to make mortgage payments because of the rising cost of living.
The regulator said it expects firms to support borrowers in financial difficulty through options such as extending the term of a loan or allowing reduced monthly payments for a temporary period.
However it warned borrowers that even making temporary changes to the terms of a mortgage 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 FCA said.
In addition to the finalised guidance, the regulator has also published new data on the mortgage market.
Its analysis showed that in addition to the households already behind on payments, 356,000 mortgage borrowers could face payment difficulties by the end of June 2024.
However, this is lower than its previous estimations, with the FCA predicting back in September last year that as many as 570,000 borrowers could face payment difficulties as a result of changes in market expectations of the Bank of England base rate.
“Our research shows most people are keeping up with mortgage repayments, but some may face difficulties,” the FCA’s executive director of consumers and competition, Sheldon Mills said.
Of those that are estimated to face payment difficulties, those borrowers coming off a fixed rate could end up paying an additional £340 a month on average.
As of June 2022, approximately 200,000 mortgage borrowers were in payment shortfall according to the FCA.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "If you’ve cut your spending to the bone, and still can’t work out how to afford the mortgage, it can feel like you have no options left, but your mortgage lender may be able to help.
"If they try to contact you, don’t assume they’re just hounding down the money. The FCA has laid out guidance for how they should help those who are struggling – including options like extending the mortgage term or cutting monthly payments for a while."
She added: "The sooner you make contact the better, ideally before you’ve missed a payment. They can take you through the options and you may well be able to find a more manageable solution. It’s better than letting your problems build – and is far better for your credit record too.
"If the thought of talking to your lender is overwhelming, you don’t have to manage on your own. Debt charities like StepChange know the systems really well and can help you navigate them.”
jane.matthews@ft.com
