Mortgage Charter published covering UK mortgage borrowers including Scotland

The UK government recently published the Mortgage Charter, according to the Scottish Government's mygov.scot service, in guidance last updated on 8 April 2022¹. The charter sets out standards that mortgage lenders in the UK will follow to help mortgage borrowers worried about higher rates, and it also covers people with mortgages in Scotland¹.

The mygov.scot page states that borrowers who bought their property with help from a Shared Equity Scheme do not need individual permission to be covered by the Mortgage Charter¹. It adds that anyone planning to switch to interest only payments should let Link Housing Association know¹. The page does not set out the individual standards in the charter, the lenders signed up to it, or the date the charter itself was published; those details have not been reported in this source.

The page sits within Help to Buy (Scotland) Affordable New Build guidance and also covers the shared equity terms attached to that scheme. It says buyers own at least 85% of their home's equity when they first buy using Help to Buy, and can repay the Scottish Government to increase that share¹. Any increase must be by at least 5% each time, and owners can increase their share up to 100%, at which point the Scottish Government no longer has a share and is not due money if the home is sold¹. Those buying a bigger share pay all valuation and legal costs, plus the administrative costs of the organisation handling the request¹.

On selling, the Scottish Government is due its share of the sale price based on how much equity it owns¹. The page gives worked examples: a house bought for £150,000 with a 15% Scottish Government share that sells for £170,000 leaves the government entitled to 15% of £170,000, and the same 15% applies if the house sells for £130,000¹. Sellers are responsible for all costs, including those incurred by the administering agent and Scottish Ministers¹. The page also states that the home is expected to be the owner's sole residence and that the Scottish Government will not allow any form of subletting as a general rule¹.

Why it matters for households

For mortgage borrowers in Scotland, the charter is reported as applying to them as well as to borrowers elsewhere in the UK, and shared equity owners are told they do not need individual permission to be covered¹. The page does not say when the charter's protections begin, which lenders have signed up, or what a borrower can ask for, so the practical effect on a given household's payments is not set out in this source.

For Help to Buy (Scotland) shared equity owners, the equity terms described are separate from the charter. The Scottish Government's share is repaid from the sale price at the same percentage as its original stake, whether the property has risen or fallen in value, and the seller meets the associated costs¹. Increasing an owner's share is possible in steps of at least 5% up to 100%, with valuation, legal and administrative costs payable by the owner¹. Remortgaging requires contact with the registered social landlord or local council that handled the purchase, and the owner bears the administrative costs of the landlord or authority and the Scottish Government's solicitors¹.

What happens next

The page directs owners to an "After Sales" brochure from the agent handling post-sales work locally, and to Scottish Government documents covering post-sale situations, including re-mortgaging, buying additional equity and adding or removing a person from shared equity documentation¹. No further dates for the Mortgage Charter are given in this source.