The chancellor Jeremy Hunt has announced that mortgage holders will be granted more flexibility over their mortgage repayments as costs soar. The Times reports that the government has ruled out a cash bailout similar to the energy bill support scheme, but other measures have been put in place to help struggling households.
The Bank of England (BoE) recently raised interest rates to 5%, a steeper rise than was predicted. As inflation in the UK remained at 8.7% despite expectations that it would fall, interest rates were raised for the thirteenth consecutive time and are now at the highest level for 15 years.
This has pushed the averaged fixed rate mortgage deal to over 6% for the first time since the shock mini budget of September 2022. Just over a year ago, average two year fixed rate mortgage deals were 2.65%, and in 2021 they were as low as 1%. Almost 1.5 million mortgage holders will see cheap deals come to an end this year.
For some, this means finding between £200 to £400 extra a month, on top of sharp increases in most other costs of living. Amid warnings that this will cause significant hardship for many people, the government has agreed a deal with lenders to ease the path for those worst affected by sudden mortgage increases.
In a statement, Hunt said that borrowers would be able to switch to an interest-only mortgage deal for up to six months, and they will be able to extend the term of their mortgage should they wish to do so. He also confirmed that any new agreement would not negatively impact credit scores.
Hunt said: “The most significant thing is they can pick up the phone to their bank or mortgage lender and talk about their situation without any worry it will impact their credit score.”
He added: “If they decide to make their payments easier — by extending the period of their mortgage or going to an interest-only package — they can go back to their original package without any questions asked, without any impact on their credit score.”
Nikhil Rathi, the head of City regulator the Financial Conduct Authority, who attended talks in Downing Street, said the “productive meeting builds on the work we’ve done over the last year to ensure those who get into difficulty receive the tailored support they need. We’ll move quickly to make any changes needed to support today’s commitment”.
Anyone who is worried about a bad credit score and needs to renew their mortgage deal is advised to seek help from a specialist mortgage broker. They will have inside knowledge of the markets, and will be familiar with the best lenders for your personal circumstances.
While mainstream lenders will not look favourably on an adverse credit history, some lenders are willing to consider other factors and are more flexible in their affordability criteria checks.
If you are looking for a mortgage broker for poor credit, please get in touch with us today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
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