Government publishes Mortgage Charter with lenders covering 85% of mortgage market

The government published the Mortgage Charter on 26 June 2023, with lenders representing 85% of the UK's mortgage market committing to the measures announced¹. The Financial Conduct Authority published a policy statement and revised rules to bring the charter into force on 30 June 2023, effective from that date¹.

The charter sets out commitments for borrowers who are up to date with their payments. These include the ability to reduce payments through a switch to interest-only payments for six months, and to extend the mortgage term to reduce monthly payments, with the option to revert to the original term within six months¹. From 26 June 2023, borrowers will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment¹. Most other commitments took effect from 30 June 2023, when the FCA's rule changes came into force¹. From 10 July 2023, participating lenders will also offer borrowers the chance to lock in a new interest rate up to six months before their old one expires¹.

The Financial Ombudsman Service said it welcomes the additional options and flexibility the charter offers, and that it will take the new commitments into account when considering mortgage complaints¹.

Individual lenders have set out how they apply the measures. Nationwide, which said it had signed up to the charter, stated that members up to date with payments can switch to a new deal without an affordability check, secure a new rate up to four months before the current one ends, extend their term, or move to interest-only for six months⁴. Nottingham Building Society, also a signatory, said the charter support is only available to residential customers who are up to date with their mortgage payments, and that it can extend a term up to age 75 or expected retirement age if earlier⁵. Saffron Building Society said it has not signed up to the charter but has agreed to follow its principles at the moment, and that from 30 October 2024 it will reduce the period in advance that a new rate can be secured from six months before a deal ends to 90 days⁶.

Why it matters for households

The measures apply to borrowers who are up to date with their mortgage payments⁵. Borrowers who have already missed payments are not eligible for the charter options and are directed to lenders' arrears teams for other support⁵. The interest-only and term extension options reduce monthly payments during the temporary period, but lenders state that borrowers will pay more in interest overall and that payments will be higher after the temporary period ends⁴. Nottingham Building Society illustrated this with a borrower owing £100,000 at 6% with 10 years remaining: payments of £1,110 before, £500 during six months of interest-only, and £1,153 afterwards, with the borrower deferring approximately £3,720 and paying around £1,200 more overall⁵. For a term extension, the same borrower's payments would fall to £716, then rise to £1,138 after reversal, deferring approximately £2,400 and paying around £800 more overall⁵. Lenders said that contacting them about support will not affect a borrower's credit rating or appear on their credit file⁴, and that the interest-only and term extension options can each generally be taken once⁴.

What happens next

The FCA's revised rules took effect from 30 June 2023¹. The rate lock-in measure applied from 10 July 2023¹. Saffron Building Society said that from 30 October 2024 it will reduce the period in advance that a new rate can be secured from six months before a deal ends to 90 days⁶.