Lenders to contact 1.6 million homeowners facing higher mortgage costs amid Middle East conflict

• Chancellor Rachel Reeves has secured a commitment from the six largest banks and building societies to proactively contact 1.6 million customers whose fixed rate deals end between now and the end of the year, the Treasury has announced.

• Ms Reeves has also reaffirmed the Mortgage Charter with lenders, “keeping clear the safety net in place for anyone worried about their mortgage“.
• The Mortgage Charter enables customers to book a new rate up to six months ahead and switch to a new deal with their existing lender without a fresh affordability check.

• It also offers temporary breathing space, including a move to interest-only payments for six months, with support discussions not affecting credit scores.

• According to the Treasury, lenders have reported more customers getting in touch for guidance, but ‘real time data shows lending holding up well and arrears remaining low’.

Chancellor Rachel Reeves said: “In uncertain times, people need clear reassurance and practical help. That’s why I’ve brought the biggest lenders together to step up support and make sure anyone who is worried can access the Mortgage Charter options quickly, without their credit score being affected.”

Mortgage rates continue to rise

The news may offer some relief to homeowners whose deals end this year, as lenders are continuing to increase fixed mortgage rates, due to the ongoing conflict involving Iran, which has pushed oil and gas prices higher, increasing inflation risk and affecting the UK interest rate outlook.

• The average 2 year fixed rate mortgage has risen from 4.83% at the start of March to 5.75%, while 5 year fixes are up from 4.95% on average to 5.69% over the same time period, according to Moneyfacts.
• A typical mortgage is now £85 a month more expensive than before the Middle East conflict began, Mortgage Advice Bureau data has revealed. These figures are based on the average of the best remortgage rates from the ten biggest lenders, borrowing £200,000 on a 2 year fixed rate mortgage.

Our view: Act now – don’t wait to be contacted

• At HomeOwners Alliance, we welcome the move to get lenders to recommit to the Mortgage Charter and to proactively contact mortgage borrowers whose fixed deals end this year.

• But the mortgage market is volatile and we’re seeing deals pulled frequently with rates edging up. So if your fixed mortgage deal ends in the next 6 months, keep up-to-date with mortgage rates and it’s a good idea to look at what your options are now, rather than sitting and waiting for your lender to contact you.

• If you speak to a mortgage broker, they’ll search the market for you, and you can lock in a rate now to protect against potential future rate rises. You can then keep the rate under review in case a better deal comes up before you commit.

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