UK Banks Agree Measures To Ease Mortgage Pressures

January 13, 2023

A number of major high street banks have agreed to extend some flexibility to mortgage holders who are struggling to meet higher monthly repayments. The Financial Times (FT) reports that leading banks including Barclays, HSBC, Lloyds, and NatWest will introduce ‘forbearance measures’ to help borrowers who are under financial pressures.

The chancellor Jeremy Hunt has led the initiative to ease the strain on households who are already reeling from hikes in energy bills, and higher grocery and fuel bills. It is estimated that almost two million households will also come to the end of their fixed rate mortgage deals this year, and will need to negotiate a new deal.

For mortgage holders who have fallen into financial difficulties that have impacted negatively on their credit record since the terms of their current deal began, the process will be even more challenging. However, it is possible to secure a new deal with advice from specialist bad credit mortgage brokers.

Circumstances that could cause a mark on your credit file include arrears on mortgage or credit card repayments, defaults, Individual Voluntary agreements (IVAs), Debt Management Plans, County Court Judgements (CCJs), or bankruptcies. The number of people with adverse credit histories has risen since the Covid pandemic.

People can often fall into payment arrears through no fault of their own, such as long-term illness that prevents them from working, redundancy, or because they are self-employed and owe money themselves. The sharp rise in the cost of living has hit householders who may still be attempting to claw back lost income during the Covid crisis.

Measures that are being put in place to help those mortgage holders in difficulty include allowing interest only repayments for a period, and allowing a switch to a more competitive deal with the usual affordability tests being applied.

UK banks are in a strong position to offer help, thanks partly to more stringent borrowing requirements that were put in place after the financial crash of 2008/9.

Nigel Terrington, chief executive of Paragon Bank, told the FT: “Banks are likely to achieve strong profit growth this year, so the extra provisioning will be affordable. Banks are more prudent today than they’ve ever been, and a lot of lending has been at the lower end of the loan-to-value range.”

Banks have been bracing themselves for increased defaults in borrowing during 2023, and are prepared to do what they can to help clients avoid home repossessions.  

James Tatch, a data and research expert at UK Finance, told the publication: “As we look ahead, the mortgage market is expected to enter a period of relative weakness from next year as house prices, the cost of living and interest rate pressures put a brake on new demand.”

Banks are also taking proactive measures to offer budgeting advice, and in some cases to offer temporary cuts in repayments to ease the financial strain. Although mortgage rates are expected to remain higher than they have been for several years, it is predicted that they will gradually fall during 2023.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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