The government’s decision to give mortgage borrowers more flexibility is a smart move in my opinion, as little has significantly changed but borrowers can be rest assured on what their lenders are expected to deliver.
Now if any lender breaks ranks and tries to repossess a property less than 12 months after a failed payment, borrowers can point to these rules.
The same goes if they are refused a temporary payment deferral or a temporary switch to an interest-only loan.
Of course, most lenders worth their salt were willing to help their customers through hard times with such measures anyway, but by removing the interpretative element borrowers can feel a little calmer about the situation if they’re worried that they could end up missing a mortgage payment.
I do however agree with Ray Boulger of John Charcol that allowing consumers to shift around their loans on a ‘no questions asked’ basis is dangerous, as it’s important that help is always tailored to a client.
I’m hoping talk of ‘no questions’ asked changes to loans is more a case of government rhetoric than a real policy, as lenders should be consulted if customers fall on hard times and need help.
As Boulger argued, if customers avoid properly consulting with their lenders there could be instances of people falling deeper and deeper into financial trouble, putting them in a situation where they end up worse off than if they sold their property.
One rule change I do like is shifting your mortgage around – and consulting with lenders on doing just that – won’t affect credit scores.
This seems like a good move as it encourages transparency, because customers won’t be punished for trying to maneuver to stave off financial issues.
It would be a nightmare scenario for customers if they were forced to switch mortgage lenders from a mainstream player to one specialising in impaired credit at the end of their term – considering how rates have already risen so steeply across the market.
So to sum up while I see the policy change as a relatively minor one, it definitely sends a good message that should help to reassure borrowers that their lenders will support them in difficult times. And in a market where sentiment and confidence is already fragile, that seems like a positive change.
