LONDON (Reuters) -Banks and building societies in Britain now have options in place to offer to mortgage customers to ease the pain of rising interest rates, the Financial Conduct Authority (FCA) said on Friday.
The FCA said it has made changes to its rulebook to support commitments made by banks to the government in a “mortgage charter” last week to help customers struggling in a cost of living crisis.
“Lenders will be able to offer borrowers a switch to interest-only payments for six months, an extension to their mortgage term to reduce their monthly payments, with the option to switch back within six months. Both can now be offered without an affordability check,” the FCA said in a statement.
The watchdog cautioned consumers that even temporary changes to mortgages will very likely result in higher monthly payments in the future or paying back more overall.
The FCA said that arrears and repossessions remain low, but that lenders need to demonstrate how they are preparing for a rise in borrowers experiencing financial difficulty.
“Mortgage lenders must provide them with tailored support if they are worried about or already struggling with their mortgage payments,” the FCA said.
Over two million customers have so far been provided with support by their lenders, including budgeting tools, debt advice and, in some cases, mortgage forbearance, such as reduced payments, lengthened loan terms or switches to interest-only, the FCA said.
UK interest rates have risen to 5% in a bid to quell stubbornly high inflation, with markets pricing in a rate of 6.25% by the end of the year.
(Reporting by Huw Jones; Editing by Susan Fenton)
