Mortgage Charter agreed by Government, FCA and lenders

The Government, the Financial Conduct Authority (FCA) and mortgage lenders agreed a Mortgage Charter in August 2023, according to a House of Commons Library briefing on mortgage arrears and repossessions in England¹. The charter was signed by lenders representing approximately 90% of the mortgage market¹.

The measures cover three areas. Customers who are up to date with payments can switch to a new mortgage deal with their lender at the end of their existing fixed-rate agreement without a new affordability check¹. Customers wanting to change the terms of their mortgage, for example by switching to interest-only payments or extending their mortgage term, have the option to revert to their original mortgage deal within six months without affecting their credit score¹. Where a lender is seeking to repossess a home, there will be a minimum 12-month period from the first missed payment before there is a repossession without consent¹.

The charter followed a rise in the Bank of England interest rate from 0.1% in December 2021 to 5.25% in August 2023¹. The Bank estimates that by July 2023, around half of mortgagor households had increases in their repayments since late 2021, and that higher rates are expected to affect most of the remainder of households by the end of 2026¹.

The briefing sets out the scale of arrears and possessions at the time. UK Finance reported around 90,700 mortgages in arrears of more than 2.5% at the end of June 2023, and around 1,100 properties taken into possession in the quarter ending June 2023¹. Both figures are well below the levels seen after the 2008 financial crisis: at the end of 2009, 216,400 mortgages were in arrears by more than 2.5% of their outstanding balance and 48,900 properties were repossessed over the course of that year¹. Repossessions stayed low during the Covid-19 pandemic, including through an industry-wide moratorium on repossessions between March 2020 and April 2021¹.

Around 7.1 million households in England own their home with a mortgage, 30% of all households, according to the English Housing Survey 2021 to 2022¹.

The briefing also records that the FCA published guidance for firms supporting existing mortgage borrowers impacted by rising living costs on 10 March 2023¹, and that UK Finance launched a national "Reach Out" campaign to raise awareness of the support available to mortgage customers¹. The Shadow Chancellor of the Exchequer, Rachel Reeves, urged the Government to make the mortgage support measures mandatory for all lenders¹. The Liberal Democrats called for a temporary £3 billion mortgage protection fund to provide grants of up to £300 a month to homeowners struggling to pay their mortgage, while the Chancellor of the Exchequer, Jeremy Hunt, ruled out providing additional financial support for mortgage holders on the basis that this would add to inflationary pressures¹.

Why it matters for households

The charter applies to customers of the lenders that signed it, which the briefing says represent around 90% of the mortgage market¹. For those borrowers, the timing of any possession action changes: a lender seeking to repossess will not do so without consent until at least 12 months after the first missed payment¹. Borrowers who change their mortgage terms, such as moving to interest-only or extending the term, can go back to their original deal within six months without it affecting their credit score¹. Borrowers coming to the end of a fixed-rate deal who are up to date can move to a new deal with their lender without a fresh affordability check¹.

Separately, from 1 August 2023 the Legal Aid Agency introduced a Housing Loss Prevention Advice Service¹. Individuals who need it do not have to meet legal aid financial eligibility rules, but they must be at risk of losing their home¹. The Support for Mortgage Interest scheme provides financial assistance in the form of an interest-bearing loan for claimants of certain means-tested benefits, and the Government has reformed it to allow Universal Credit claimants to access support while working and to shorten the qualifying period before support can be received¹. The Government provided £91.4 million funding in 2022/23 for the Money and Pensions Service to provide debt advice in England¹.

The briefing does not report a start date for each individual charter measure beyond the August 2023 agreement, and it does not state how the 12-month period interacts with existing court processes.

What happens next

The briefing records no further dated steps for the charter itself. It notes that higher interest rates are expected to affect most of the remaining mortgagor households by the end of 2026¹.