Interest rates on mortgages reach their highest point in 15 years' span
In the face of rising mortgage rates, UK banks and the Financial Conduct Authority (FCA) are taking steps to support homeowners struggling with their payments. During a hearing with the treasury committee, bank representatives admitted that while they have not seen a significant increase in customers in arrears, those taking out new loan deals are facing higher payments above £200 per month. This trend is due, in part, to the continuous increase in mortgage rates by banks like Lloyds, Santander, and Nationwide, as a result of the significant rise in interest rates. The average mortgage rate has been climbing steadily, surpassing the peak seen in October 2022. This surge is attributed to the aftermath of the mini-budget delivered by Kwasi Kwarteng, former Chancellor of the Exchequer, in September 2022. The recent spike has even pushed mortgage rates to a new high of 6.66%, a level last seen in August 2008 during the Great Recession. To provide some relief, the mortgage industry, including Lloyds, Santander, and Nationwide, has agreed to a new charter with the chancellor. The charter aims to provide clarity and consistency for consumers, and under the new terms, struggling borrowers can switch to interest-only payments for six months. Additionally, mortgage terms can be extended to reduce monthly payments. The FCA is urging homeowners who are struggling with their mortgage or believe they might have difficulties to speak to their lender. While they cannot stop mortgage rates from rising, they have measures in place to ensure people receive support when needed. Changing a mortgage contract could lead to higher payments down the line, so it's essential for homeowners to seek advice before making any decisions. Bank representatives were also asked to explain the support they will be offering to customers during this financially difficult time. The FCA emphasizes that they have implemented measures over the past decade to support homeowners during financially difficult times. If you're concerned about making your mortgage payments, don't hesitate to contact your lender for assistance. The FCA is there to help, and so are the banks. Elisa Ventur is the photographer for the associated image. In other news, the Bank of England has been increasing interest rates in an attempt to steer the UK away from another recession, with the most recent increase being the 13th in a row. The most recent Mortgage Charter between the industry and the Chancellor of the Exchequer, aimed at providing consumers with clarity and consistency, was agreed upon in 2023. The FCA does not mention any specific new measures or changes in their regulations at this time. Stay tuned for more updates on this developing story.
