British banks and building societies have committed to providing greater flexibility to homeowners struggling with mortgage repayments as interest rates rise. Bank executives met with Chancellor Jeremy Hunt at Downing Street to discuss measures to alleviate the financial burden on borrowers. Under the new arrangement, borrowers will have the option to temporarily modify their mortgage terms and then return to their original agreement within six months. This flexibility allows individuals to reduce their payments temporarily by paying only the interest on the loan.
Chancellor Hunt emphasised that the temporary changes to mortgage terms will not adversely affect credit scores as they might have done previously. However, it should be noted that missing payments or taking a complete break, known as a mortgage holiday, will still have implications for future borrowing capacity. In addition to the flexibility in repayment terms, lenders have also agreed to a 12-month moratorium on repossession proceedings against borrowers who are unable or unwilling to make long-term payments.
Following the meeting, bank chief executives described it as “productive,” signalling a collaborative approach to addressing the challenges faced by homeowners. The meeting was prompted by the Bank of England’s decision to raise interest rates to 5%, causing concerns for millions of UK households. While the government’s response does not involve direct intervention, it aims to raise awareness among struggling borrowers about the options available to them. Chancellor Hunt emphasised the importance of open communication between borrowers and lenders and assured support for those facing difficulties.
In response to the interest rate increase, the National Residential Landlords Association (NRLA) called for government action, such as reintroducing mortgage interest relief and unfreezing housing benefits. However, both Chancellor Hunt and Prime Minister Rishi Sunak dismissed the idea, citing potential interference with the Bank of England’s efforts to combat inflation. The government remains committed to its plan to tackle inflation and has urged borrowers to seek assistance from their lenders if needed.
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