The City regulator, the Financial Conduct Authority (FCA), has adjusted its rulebook to back the pledges made by banks and building societies at the end of June. It says lenders should make their increased support options clear and accessible to all borrowers.
The charter includes commitments such as allowing struggling mortgage customers to lower monthly bills by switching to interest-only payments for six months, or extending a mortgage term.
Here, Which? delves into what's included in the new charter and reveal the lenders that have signed up.
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In the wake of the interest rate turmoil , which has seen average mortgage rates on two and five-year fixes surpass 6%, lenders have agreed to offer more flexibility to struggling homeowners.
Tailored forbearance measures are already offered by providers, but the options available differ lender to lender.
Under the new charter, the support options become clearer, and these will be regulated by the FCA to ensure banks and building societies are fulfilling what they've agreed to.
The government says the measures 'should offer comfort to those who are anxious about high interest rates' and 'support for those who do get into difficulty'.
Customers who are up-to-date with their payments, but will struggle to meet future payments can take respite by:
New affordability checks will not be required before borrowers make a switch, and credit ratings will be not impacted.
However, if customers continue to take the relief after the six-month period, their credit file could then be impacted.
From 10 July, customers coming to the end of their fixed-rate deal will be able to book a new rate with their existing lender once contacted.
This can be agreed six months in advance of your existing deal expiring.
Once booked in, you will be able to request a better deal from the lender up to two weeks before the new term starts.
This often happens already, however, its inclusion in the charter firms up the commitment.
Thanks to the charter, anyone who falls into arrears will not have their home repossessed without consent, unless in exceptional circumstances, for at least 12 months.
Lenders usually tend to start the repossession process after three months, but those which have signed the charter have agreed to push this back to a year.
The extension is hoped to offer some slack for homeowners, allowing them additional time to stabilise their financial situations.
The FCA welcomes the commitments, but adds that borrowers should be aware that making changes, even temporary ones, will very likely result in higher monthly payments in the future or paying back more overall.
For example, switching to interest-only for six months will mean your mortgage will take longer to pay off, as you won't be increasing the equity you own during this time and only paying off the interest. The capital amount you owe will not budge.
Sheldon Mills, from the FCA, said: 'If you can keep up with your mortgage payments, you should, as changing your contract could lead to higher payments down the line.'
For more detail on the pros and cons of mortgage support options, head to our guide to learn what to do if you can't pay your mortgage .
Note: the list below groups together banks and their subsidiaries, such as Lloyds and Halifax. The commitments of the charter do not apply to buy-to-let mortgages.
Around 85% of mortgage providers have agreed to the charter, including all of the major banks and building societies.
The full list is as follows:
The charter only applies to customers of lenders who have signed up. However, if your bank or building society is not on the list, that isn't to say it doesn't offer mortgage support options.
If you are struggling to pay or concerned about your future finances, it's important to contact your lender as soon as possible.
