Money Saving Expert founder Martin Lewis has warned anyone with a mortgage that they’re facing a massive ‘payment shock’ when their fixed deals come to an end - or if they’re on a tracker. Millions of families around the country are enduring financial problems due to soaring interest rates for their home repayments.
Some will be left unable to pay with pressures such as feeding their families and paying for power in the winter all vying for shrinking funds. Mr Lewis said he was set to take part in a mortgage summit with Chancellor Jeremy Hunt and various bank chiefs to discuss measures to help people.
These could include allowing families to take mortgage holidays, being more flexible to change interest only temporarily or scrapping stress tests at seven per cent that stop people borrowing at four per cent and end up leaving them at six per cent instead, Yorkshirelive reports.
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Speaking on his Martin Lewis Podcast, he said: “Those who already have mortgages are gonna face ‘huge payment shock’ when their current mortgages end and they’re moved onto far higher rates. That’s likely to peak in the spring, when it’s thought, and nobody truly knows, interest rates will be at their high.
"We all know interest rates go up and mortgage costs go up. There are a huge number of people whose fixes will be ending next year, and whose fixes are ending right now and they will all be seeing huge rises.”
He then revealed that a meeting is going to be held with the government to try to get a fix in place. "I had a meeting with Jeremy Hunt a few days before the autumn statement. In there, I talked about my great concern for the spring and the huge payment shock many people will face when their current mortgage deals come to an end and they have to move onto a new one.
“I suggested we need to look at measures of forbearance and flexibility in order that we are able to make sure people get over that hump. Now this is not about manipulating the housing market, it’s not about any great huge changes.”
Mortgage lenders should support struggling customers in a range of ways that suit their needs, the City regulator said. The Financial Conduct Authority (FCA) has published guidance setting out options that firms can use to support their customers to manage their monthly mortgage payments amid the cost-of-living squeeze.
It is seeking comments on the draft guidance by December 21 2022. The FCA’s draft guidance sets out the flexibility that firms have to support customers who have missed monthly mortgage payments or are worried they may not be able to make payments in future.
It covers options including extending the term of the mortgage, switching to interest-only for a temporary period, moving to a different interest rate or making reduced monthly payments for a temporary period.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Most borrowers are able to keep up with their mortgage payments and should continue to do so. But if you’re struggling to pay your mortgage, or are worried you might, you don’t need to struggle alone. Your lender has a range of tools available to help, so you should contact them as soon as possible.”
Making changes, even temporary ones, may result in higher monthly payments in future or paying back more overall. Mortgage borrowers should consider carefully any steps they take and customers who can keep up with their payments should continue to do so, the regulator said.
The Treasury said Chancellor Jeremy Hunt had met banking CEOs, along with consumer champion Martin Lewis and the FCA on Wednesday. The banking CEOs, who cover more than 70 per cent of the market, recommitted to protect mortgage holders by enabling them to switch to a new fixed rate mortgage, without a new affordability test, when their current deal ends if consumers are up to date with their payments. This covers 97 per cent of the market.
Mortgage lenders should also provide customers with well-timed information ahead of any change to rates and offer specific help to those who start to struggle with payments. Lenders should also ensure that highly trained and experienced staff are on hand to help.
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