THOUSANDS of struggling homeowners could miss out on major mortgage help – and its all in the fine print.
More than 30 lenders have signed up to a new mortgage charter to offer struggling households more support.
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It comes after the Bank of England (BoE) increased its base rate by 0.5 percentage points last week to 5%, leaving borrowers in crisis.
But the new measures are meant to provide breathing space for struggling homeowners.
From July 10, customers approaching the end of a fixed-rate deal will have the chance to lock in a deal up to six months ahead.
Homeowners will be able to request a better deal with their lender right up until their new term starts if one is available.
Plus, any homeowner will be able to approach their lender for advice on repayments without impacting their credit score.
Homeowners will be able to change their mortgage to interest only and extend the terms of their loan.
This change will also have no impact on the homeowner’s credit score.
But if homeowners then want to go back to their original plan within six months they will be free to do so.
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A new cause on rules around home repossessions came into force earlier this week.
The rules stipulate that a borrower will not be forced to leave their home without their consent within a year since the homeowner made their first missed payment.
But tens of thousands of households who are already in arrears won’t be able to benefit from some of measures, The Treasury has confirmed.
Being in arrears means that you have a mortgage payment that is overdue.
More than 76,000 homeowner mortgages are in arrears, according to latest figures from UK Finance.
These households won’t automatically be able to take advantage of many of the new measures like millions of other homeowners, the fine print of the mortgage charter reveals.
That includes switching to interest-only, extending their mortgage term, or being able to lock in a fixed-rate deal six-months in advance.
However, they are protected from repossession, unless in exceptional circumstances.
Sarah Coles, head of personal finance at Hargreaves Lansdown said this “killer detail” in the charter could leave some people in the lurch.
She said: “It means that many of those who need help most will be unable to move to an interest-only deal or extend their term.
“It could be a nasty blow for those who thought this could finally be the light at the end of the tunnel.”
Sarah added that anyone who is struggling – regardless of their financial circumstance – should speak to their lender.
This was echoed by The Chancellor Jeremy Hunt in a statement to MPs on Tuesday.
He said: “Anyone at all who is worried they could be in this situation should know they can call their lender for advice without any impact whatsoever on their credit score.”
Paul Broadhead, head of mortgages and housing at the Building Societies Association, said borrowers in arrears should always reach out to their lender for advice.
Plus, while these borrowers won’t get the help automatically under the charter, their lender might still offer this help voluntarily.
He said: “Lenders have a range of tools that they can use to support those in arrears, depending on a borrower’s individual circumstances.
“These may include moving a mortgage onto a longer term, a temporary switch to interest only, or offering a short-term payment concession, for example.
“There is support available for all mortgage customers from all lenders outside of the new measures announced in the Charter.”
What does being “in arrears” mean?
If you have mortgage payments overdue then you are in arrears.
If you miss a payment your lender will contact you within 15 days to tell you that the payment is due.
Don’t wait for this letter to arrive to do something about it.
You need to act fast as soon as you can to get the best outcome and secure your mortgage.
What other mortgage help is available?
As soon as you think you will have a problem with your monthly mortgage repayment – whether you can’t pay anything, can’t pay all of your monthly payment or can’t pay it on time – get in touch with your lender straight away.
They have certain schemes in place to help you if you’re struggling.
You can ask your lender about the breathing space scheme if you’re finding payments unaffordable.
Under the breathing space scheme, none of your debts will earn interest and no fees will be added for 60 days.
You’ll be protected from debt collectors and bailiffs.
You may also be able to apply for a payment holiday – this is when you don’t need to pay anything.
But interest and charges may continue to be added, and missed payments will need to be made up in the future.
Every company has a different policy so you’ll need to get in touch to find out what support is available to you.
Support for mortgage interest or SMI helps those on Universal Credit – and other benefits – by giving them a low-interest loan.
The help goes towards mortgage payments or towards loans taken out to help repair any damage to the home.
SMI is a loan that you will need to repay with interest when you sell your home.
You’ll get help paying the interest on up to £200,000 of your loan or mortgage.
But you’ll only get up to £100,000 if you’re getting Pension Credit.
The interest added to the loan can go up or down, but the rate will not change more than twice a year – the current rate is 3.03%.
Contact the office that pays your benefit to find out if you could get an SMI loan.
There are also several charities and services that offer free help and advice if you’re worried about money.
It’s always best to contact one of these services before thinking about debt consolidation or using a debt adviser who will likely charge you.
Citizens Advice is a free and impartial service which will help you come up with a plan to get on top of your debt including which payments to prioritise and how to reduce your living costs.
The organisation’s website has a useful page with advice on many aspects of debt, but you can contact them directly by phone, online or in person for more personalised help.
StepChange is another free advice service offering support and guidance online or over the phone, and it’s completely confidential.
You’ll need to provide details of your debts, income and household spending to get a clear picture of where your money goes.
Where possible, their advisers will help you come up with a plan to repay all your debts but in a way that you can afford.
National Debtline is a charity run offering free and confidential advice to people in England, Wales and Scotland.
You can contact them online or over the phone on 0808 808 4000, between 9am and 8pm Monday to Friday, and 9.30am to 1pm on Saturdays.
An adviser will help you work out what you can afford to repay, and help you decide on the best solution for your debt.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
You can also join our new Sun Money Facebook group to share stories and tips and engage with the consumer team and other group members.
