Opinion: mortgage help is little more than a sticking plaster

Government got lenders together to offer more help to borrowers worrying over higher repayments. But will it make any difference?

The UK is in the midst of massive mortgage upheaval. Recent weeks have seen significant increases to the interest rates on offer on mortgage products.

Worrying inflation data has meant that the cost of funds for mortgage lenders has rocketed, and that’s meant they have little option but to hike what they charge on their deals.

And that’s had a horrible impact on borrowers across the country, from those hoping to go through with a purchase, to those set to remortgage from expiring fixed rate terms.

There aren’t just small hikes to the size of their repayments either ‒ we are talking about hundreds of pounds extra every single month.

Unsurprisingly, an awful lot of households are feeling the pressure here.

There simply isn’t the extra money in the monthly budgets for any people, given the rising costs we’ve had to pay on virtually every other outgoing.

In a bid to help with the situation, last week the Government dragged mortgage lenders together. So what help is now in place, and will it make a difference at all?

What help is on offer?

Following a meeting between mortgage lenders and the Chancellor, it was announced that certain measures will be in place to provide borrowers a little breathing space.

For example, lenders have promised not to repossess homes within 12 months of the first missed mortgage repayment, providing borrowers with a little more time to get their finances in order.

Borrowers will also be able to move to an interest-only mortgage for six months, or else extend their mortgage term in order to cut the size of their repayments, and then move back to the original term within six months.

In both cases, borrowers can do so without having to go through an affordability check or any impact on their credit score.

Lenders have pledged to offer tailored support to struggling borrowers, which could also include temporary payment deferral or moving to a part interest, part repayment basis on their deals.

Finally, there will also be greater support on offer for those who are up to date on their payments, so that they are best placed to switch to a new deal at the end of their existing deal.

Jeremy Hunt said that the measures would “offer comfort to those who are anxious about high interest rates and support for those who do get into difficulty”.

The bare minimum

But is that true? Will these measures actually make much difference for borrowers who are staring down the barrel of big jumps to their repayments, and panicking over their options?

I’m not so sure. Six months of reduced payments by going interest-only could be helpful, but realistically it’s just kicking the can down the road.

It’s not solving the issue, it’s putting it off in the hope that things change in a few months.

While it’s welcome that lenders are openly talking about being flexible and offering tailored support to their borrowers, realistically there was nothing stopping them doing this before they had a cup of tea with the Chancellor.

Speak to mortgage brokers, and there’s enormous cynicism around the whole situation.

It’s a classic example of being seen to do something, but without it really doing much. One described it as like trying to put out a fire with a water pistol, and it’s difficult to disagree.

No time for the head in the sand

That doesn’t mean that the situation is hopeless, but more that it’s important for borrowers themselves to be proactive.

If any borrower is concerned about their mortgage situation, then acting quickly is absolutely vital.

That means speaking to your mortgage lender about the options open to you ‒ ultimately lenders will want to work with you to find a set-up that is suitable to you.

Getting advice about the mortgage deals open to you at the moment is also smart.

Yes, mortgage advice is an additional cost at a time when you’re already counting every penny, but the reality is that brokers not only have access to deals you don’t as an individual borrower, but they also know better who is likely to be able to help.

Taking a long-term view is helpful too.

Lenders will allow you to lock in a deal around six months before it starts, meaning you can sign up for a fixed-rate deal today but then have the option of dropping out if rates have fallen by then and you can find a better rate elsewhere.

Equally, these higher payments are not disappearing any time soon. It’s crucial for borrowers to do everything they can to find some space in their own budgets, to open up a little bit of disposable income which can instead be devoted towards those mortgage repayments.

Keeping your head in the sand is not going to make things easier, but acting sensibly can ensure that your mortgage repayments are kept as affordable as possible.

For more, read our guide on what to do if you’re worried about mortgage repayments.