Majority of mortgage lenders sign new mortgage charter

The majority of mortgage lenders signed a new mortgage charter in June 2023, confirming support options for those unable to keep up with their payments¹. Under the charter, anyone who misses payments will not have their home repossessed without consent, unless in exceptional circumstances, for at least 12 months¹.

The charter sits alongside a mortgage market in which homeowners are facing the highest costs for 15 years. The average two-year fixed rate is 6.66% and the average five-year fix is 6.15%¹. Rates on fixed deals decreased in August 2023, but the dips were minimal¹. What happens next depends on the base rate, which could rise for the 15th consecutive time in September¹.

For borrowers approaching the end of a deal, lenders allow a new rate to be locked in up to six months before the agreement commences, with a better deal able to be requested at any point before then¹.

The charter is separate from the energy price cap, which has been in place since 1 July 2023 and limits the price of a single unit of energy for customers on variable tariffs. It does not apply to those paying for a fixed tariff¹. Under the cap, energy bills for a typical household are around £173 per month, or £2,074 per year, with an average electricity unit rate of around 30p per kWh and an average gas unit rate of around 8p per kWh¹.

Why it matters for households

The charter's protection applies to mortgage borrowers who fall behind on payments. For at least 12 months from a missed payment, a lender that has signed the charter will not repossess the home without the borrower's consent, except in exceptional circumstances¹. The charter also confirms support options for those unable to keep up with payments¹.

The wider rate picture affects anyone whose fixed deal is ending or who is borrowing now. The average two-year fixed rate of 6.66% and average five-year fix of 6.15% are the rates reported in early September 2023¹. The ability to lock in a new rate up to six months before an agreement commences applies to those with a deal due to end¹.

On energy, the price cap affects households on variable, also called out-of-contract or default, tariffs. It does not apply to fixed tariffs¹. From 1 October 2023, the typical household bill was expected to drop slightly to around £160 per month, with the electricity unit rate changing to around 28p per kWh and the gas unit rate to around 7p per kWh¹. Daily standing charges were staying the same or may even increase slightly, so bills would change differently from the headline figures depending on where a household lives and how much energy it uses¹. The cap is set by Ofgem, changes every three months and was expected to rise in January 2024¹.

The government's £400 energy discount to every UK household, which began in October 2022, ended in April 2023¹.

What happens next

The base rate could rise for the 15th consecutive time in September 2023, and average mortgage rates seemed likely to linger around the 6% mark for the coming months¹. The energy price cap was expected to rise in January 2024¹. No further dated steps on the mortgage charter itself have been reported.