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Daily Mirror

Business

Ruby Flanagan

New mortgage rules kick in TODAY - what this means for you and all the help available

The Bank of England Interest Rates Lloyds NatWest

New support for Brits struggling with rising mortgage costs comes into from force today.

The help comes through the "Mortgage Charter" which is a set of measures certain major lenders have signed up to.

The charter - agreed between the Government, principal mortgage lenders and the Financial Conduct Authority (FCA) – has been signed by over 40 lenders including Barclays, Natwest, Lloyds and many others.

The charter is intended to help millions of homeowners who are facing a huge jump in monthly mortgage repayments because of rising interest rates after the Bank of England upped rates to 5% last month.

As of today, the average two year fixed rate mortgage sits at 6.63% whilst the average five year rate is 6.13%.

However, you should be aware that this particular mortgage support does not cover those with a buy-to-let mortgage.

What help does the Mortgage Charter offer?

Firstly, from today (July 10), mortgage holders can switch their mortgage deal to a interest-only plan for up to six months.

This will temporarily bring down the monthly payments and they can switch back to their original deal with no impact to their credit score.

Mortgage holders will also be able to extend the length of their term.

As well as this, customers approaching the end of a fixed-rate deal will have the chance to lock in a new deal up to six months ahead.

They will also be able to manage their new deal and request a better like-for-like deal with their lender right up until their new term starts if one is available.

This means if you lock in a rate now in July, that rate will be honoured until your mortgage renews in January.

If a new deal comes and it's better than the one you have locked in then you will be able to switch to it with no issue.

This covers lenders if interest rates start to go down going forward.

While this has often been offered by some lenders in the past, it is now a firm commitment from lenders signed up to the charter.

Of course, switching the terms of your mortgage can have impacts on how much you end up paying overall - so always speak to a mortgage broker first before making any big decisions.

For example, switching to interest-only reduces your monthly repayments but does mean you don't actually pay off the capital you own.

Extending the length of your mortgage means you'll take longer to pay it off and you'll likely pay more interest over time.

Alongside this, lenders will need to provide "well-timed information" to help customers plan ahead when their current rate is due to end.

Some elements of the charter came into effect last month with borrowers not allowed to have their homes repossessed within 12 months of their first missed mortgage payment.

Homeowners can also approach their lenders for advice on repayments without impacting their credit score.

To take advantage of the support, borrowers should contact their mortgage provider directly.

You should also be aware that you'll need to be up to date with your repayments to be eligible for the help, as it doesn't apply to those who have already fallen behind on their mortgage payments.

The details of the charter were published on Gov.uk here.