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Struggling homeowners will be able to switch to interest only deals under FCA plans

Stock Markets Dec 08, 2022 09:12
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© Reuters. Struggling homeowners will be able to switch to interest only deals under FCA plans

Proactive Investors - Homeowners struggling to pay their mortgage bills will be able to switch to interest-only deals without a formal repayment plan to help borrowers through the cost of living crisis under arrangements being drafted by the Financial Conducts Authority.

Customers will be able to ditch repayment loans for a temporary period under the plans being laid out by the City watchdog.

It announced the plans on Wednesday after attending a roundtable with lenders and the government to discuss ways to help mortgage borrowers as fears of arrears mount.

The FCA guidance said the plans would help lenders prepare for “providing mortgage forbearance at scale”.

Interest-only deals were once prevalent but became heavily regulated after millions of borrowers were sold deals before the financial crisis with no plan on how to repay the capital.

However, some 1.8mln homeowners will come to the end of fixed-rate deals in 2023, according to banking trade body UK Finance, and will have to refinance at far higher rates, in some cases quadruple their previous deals.

The planned FCA guidance advises lenders to let homeowners who are at risk of payment shortfalls switch to an interest-only loan without an agreed repayment strategy.

For a permanent switch to an interest-only basis, a credible repayment plan would still be required, the FCA said.

After the meeting between the government and banks, the chancellor Jeremy Hunt said it was his number one priority to tame inflation for the British public.

He added: “UK lenders have a part to play in that. We expect every lender to live up to their responsibilities and support any mortgage borrowers who are finding it tough right now.”

The FCA is now consulting on the guidance over the next 10 days.

Read more on Proactive Investors UK

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Struggling homeowners will be able to switch to interest only deals under FCA plans
 

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Comments (3)
Johnny B Goode
Johnny B Goode Dec 08, 2022 13:03
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Thats stupid, they are just postponing and making the problem worse
Steven Walker
Steven Walker Dec 08, 2022 9:37
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Good grief... Rates above inflation is the only way out of this. if that means people can't afford their house, downsize - it's simple. prices need to drop significantly to allow the younger generations access to ownership of basic shelter. sorry but it's true...
Jonathan Curran
Jonathan Curran Dec 08, 2022 9:37
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Nonsense higher rates = less consumer spending = deeper recession
Jonathan Curran
Jonathan Curran Dec 08, 2022 9:37
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I expect you have savings that would benefit from higher interest rates
Steven Walker
Steven Walker Dec 08, 2022 9:37
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sorry but see the 70s. Rates above inflation ultimately was the only way out then, struggle to see how we get out of this otherwise without excessive squeezing of the working population. Incidentally any savings I do have go to provide care for family members as NHS support is not there. Hope your situation as perhaps a homeowner isn't as bad...
Matt Hester
Matt Hester Dec 08, 2022 9:35
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Kicking the can down the road, can’t afford it… down size
 
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