FCA urges UK banks to consider cutting mortgage payments for those struggling
The UK regulator has told banks to consider slashing mortgage payments for borrowers struggling with rising bills, as it revealed that 356,000 homeowners could be at risk of missing their monthly instalments by summer 2024.
The guidance from the Financial Conduct Authority confirms how lenders can support customers who have missed payments or are worried they may fall behind, including by extending the term of their mortgage to lower the monthly amount due, or temporarily slashing payments.
However, it does not go as far as guidance issued during the Covid-19 crisis, when lenders where urged to provide more payment holidays and interest-only arrangements during pandemic lockdowns.
Bank bosses had been concerned they could face complaints or regulatory action if they allowed customers to reduce payments, because changing the terms of a mortgage can make it more expensive in the long term and affect a borrower’s credit score.
The latest guidance came as the FCA released new estimates that showed 356,000 borrowers could face struggle to make their mortgage payments by June 2024, though that is down from the 570,000 it had estimated were struggling in September last year. The latest figure includes mortgage holders who are rolling off fixed-rate deals and could end up paying an additional £340 a month on average because of higher interest rates.
Homeowners have been hit with higher mortgage payments as a result of September’s disastrous mini-budget that spooked financial markets and pushed up borrowing costs. While borrowing rates have eased since then, it has resulted in increased payments for borrowers on variable rate mortgages as well as those who have had to remortgage at higher rates.
Despite the latest FCA guidance, banks
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