The FCA has confirmed final mortgage guidance, setting out the ways mortgage lenders can help customers worried about or already struggling with their mortgage payments because of the rising cost of living.
The FCA has also published new data and analysis on the mortgage market. This shows that, in addition to the households already behind on payments, 356,000 mortgage borrowers could face payment difficulties by the end of June 2024.
This is down 214,000 from the 570,000 borrowers the FCA previously estimated in September last year due to changes in market expectations of the Bank of England base rate. Amongst this group those rolling off a fixed rate deal could end up paying an additional £340 a month on average.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:
'Our research shows most people are keeping up with mortgage repayments, but some may face difficulties.
'If you’re struggling to pay your mortgage, or are worried you might, you don’t need to manage alone. Your lender has a range of tools available to help. Get in touch as soon as you have concerns, don’t wait until you’re about to miss a payment before doing so. Just talking to them about your options won’t affect your credit rating.'
The FCA’s research found that borrowers aged 18-34 are more likely to be financially stretched than the rest of the working age population. Those living in London and the South East are most likely to be stretched. Being stretched does not necessarily mean borrowers will miss payments as some will be able to use savings, reduce spending, or increase incomes to help meet their mortgage commitments.
As well as contacting their lender for support, worried borrowers can also visit MoneyHelper for useful money tips, budgeting tools and to find free, expert debt advice.
Lender support for borrowers
The FCA, major lenders and consumer representatives attended a mortgage summit hosted by the Chancellor in December. Since then, the FCA has continued to work with lenders to make sure borrowers get the support they need, including timely communication.
Lenders proactively contacted customers a combined total of 16.5 million times, across a range of channels, to offer support in the last year. Following conversations with the FCA, lenders have confirmed they expect to increase this to 20.5 million contacts over the next year.
Lenders supported over 2 million customers to manage their finances in the past year, including through budgeting tools, access to debt advice, and tailored mortgage forbearance.
The FCA is also working with the Money and Pensions Service, consumer groups and lenders to raise awareness of the help available to mortgage borrowers worried about keeping up with payments.
The FCA expects firms to support borrowers in financial difficulty. Its finalised guidance confirms how mortgage lenders can support customers who have missed payments or are worried they may not be able to make payments in future. It covers options such as extending the term of their mortgage or making reduced monthly payments for a temporary period.
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.
Today’s publications build on work the FCA has already done to make sure firms treat customers fairly and support those struggling financially due to the rising cost of living.
In line with its three-year strategy, the regulator has previously reminded firms of the standards firms should meet to support struggling borrowers and where they need to improve their treatment of those in financial difficulty. This follows on from the swift action the FCA took during the pandemic to protect borrowers, including introducing its tailored support guidance.
The FCA will continue to monitor the mortgage market and how firms are supporting their customers.
Notes to editors
- FG23/2: Guidance for firms supporting their existing mortgage borrowers impacted by the rising cost of living.
- Research Note: Mortgage borrowers and macroeconomic developments.
- Approximately 200,000 mortgage borrowers were in payment shortfall as of June 2022.
- The FCA previously published analysis projecting that 570,000 borrowers would become financially stretched by the end of June 2024. This analysis was based on market expectations as of 23 September 2022, which saw the bank rate peaking at around 5.5%, as opposed to a peak of around 4.5% in the February expectations used to calculate its most recent estimate. The FCA continues to monitor the market closely.
- The FCA defines mortgage borrowers as financially stretched if more than 30% of their gross household income goes towards mortgage payments and they are not currently in payment shortfall.
- The FCA has information for borrowers worried about rising interest rates.
- The FCA previously found that 47% of borrowers in financial difficulty mistakenly believed that simply contacting lenders about the support available would have an impact on their credit file. If borrowers agree an option with their lender to pay less than the agreed amount in their contract, this will be reflected on their credit file. But just talking to their lender won't affect their credit file and nor will some forms of support.
- Figures on customer engagement and support provided by UK Finance. This includes contact via post, telephone, email, SMS, website and in app messaging, with individual customers often contacted more than once.
- Find out more information about the FCA.