What is the Mortgage Charter?
The Mortgage Charter is a temporary agreement between lenders and the Government (HM Treasury) to support borrowers with the current cost of living position.
It is a voluntary agreement and therefore up to each lender to decide whether they will sign up. Newbury Building Society is one of the lenders that has signed up to the Charter.
What has changed?
Lenders who have signed up to the Mortgage Charter have agreed to all of the pledges. The first four are nothing new to us, we already offer these:
You can contact lenders for help and guidance, without any impact on your credit file. Simply contacting us does not impact your credit file. A credit file is ‘marked’ only if a customer has a payment shortfall or arranges to pay less than their contractual payment for a temporary period.
Customers who are up-to-date with payments can switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check. We do not require an affordability check when you switch deal, as long as you are up to date with your payments.
Borrowers receive well-timed information to help them plan ahead should their current rate be due to end. We send an invitation to you to talk to us 4 months before your existing deal is due to end so that you have ample time to make arrangements.
Lenders will offer tailored support for anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances. We have a dedicated and skilled team supporting borrowers with financial difficulty, with a variety of options tailored to individual needs.
In addition, we, along with other lenders who have signed up, have agreed that:
A borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment.
Customers approaching the end of a fixed rate deal will have the chance to lock in a deal up to four months ahead. They will also be able to manage their new deal and request a better like for like deal with their lender right up until their new term starts, if one is available.
Customers who are up to date with their payments can:
Switch to interest-only payments for six months; or
Extend their mortgage term to reduce their monthly payments for six months.
Both these options are available without the need for the normal affordability assessment and without the arrangement being recorded with Credit Reference Agencies.
What types of mortgages does the Charter apply to?
It is available for (first-charge) mortgages secured on a borrower’s main home, including shared ownership and help to buy schemes. It does not apply to buy-to-let, commercial or short-term bridging loans.
My fixed-rate mortgage deal is coming to an end, what can I do to secure a new deal?
Lenders signed up to the charter are enabling customers who are coming to the end of their fixed rate deal to be able to secure a new like for like fixed rate mortgage up to six months before the existing deal expires. Lenders will have different qualification periods; Newbury Building Society will enable customers to secure their new deal four months before the existing deal expires.
Can I switch to a new cheaper fixed rate deal if I have already locked into a new one?
If a lower rate becomes available before you move on to the new fixed rate, you will be able to change to the new lower rate up to two weeks before your new rate starts. We will issue a new offer that you will need to sign. If anything changes other than the rate (e.g. you want a variable rate product or a different term product) then we will need to revisit the advice we gave you.
Will you tell me if a lower rate becomes available during the period before I switch deals?
The Charter does not require lenders to tell customers; this is difficult due to the levels of customers switching deals and the frequent changes in deals and interest rates. Customers can ‘manage their own deal’ (in the words of the Charter) by checking the mortgage products on our website or by contacting their Mortgage Adviser.
What additional options to reduce my payments do I have as part of the Mortgage Charter?
You have one of two options to reduce your payments for one six-month period:
1. Switch to interest-only payment for six months
If you are up to date with your mortgage payments, you can switch to interest-only payments for six months. This arrangement will not be reported to Credit Reference Agencies.
2. Extend the term of the mortgage
If you are up to date with your mortgage payments, you can extend your mortgage term to reduce your monthly payments. If the extended term goes beyond retirement age, we are required to assess whether the mortgage remains affordable. This arrangement will not be reported to Credit Reference Agencies.
Whatwill be the impact on my payments and mortgage balance when switching deal, taking a temporary change to interest only or extending my term for 6 months?
We will make clear to you the potential costs of taking any of the options available to you under the Charter before you make your decision.
If you are switching your deal, you will receive what’s called an ESIS (European Standard Illustration Sheet). If you are considering switching to interest only or extending your term for 6 months, we will provide you with a before and after position for your payments and balance. The illustrations we provide will be indicative, as the Bank of England rate, and therefore our rates, may change in the period.
If you can afford to pay your mortgage on its current basis, it is in your best interest to do so. This is because you will be charged more in interest over the term of the mortgage by reducing your payments through paying interest only or extending your term.
What if I miss a payment during the 6 month temporary change to interest only or the term extension?
If your agreed payments are not made in full each month during the 6-month period, the Mortgage Charter concession ends. This means that to continue on an interest only basis or with the extended term, an affordability assessment will be needed, and the arrangement will be reported to Credit Reference Agencies as normal. We will, of course, continue to provide you support for as long as is appropriate.
I have a shared ownership mortgage, does my housing association need to agree to changes?
If you are switching deal, then no. If you switch to interest only or extend your term, we will need permission from your housing association before we make the change. We will obtain this for you.
Are there any fees or charges to set up the 6 month temporary change to interest only or the term extension?
No there are no fees involved in setting up an Interest Only or term extension as part of the Mortgage Charter. In addition, to help support those borrowers already in financial difficulty we have agreed to waive all fees relating to unpaid Direct Debits and letters sent by us regarding outstanding payments, until 31 December 2023.
My mortgage term is ending soon, do I qualify for the 6 month temporary change to interest only or the term extension?
We cannot extend your term beyond your contractual term end. You must have sufficient time remaining to be able to repay the missed capital payments and the accrued interest before your term ends. Due to this, we will consider a concession if you have at least 12-months remaining on your mortgage after the arrangement ends.
When your 6 month term extension comes to an end, your mortgage term will revert back to it’s original term (e.g. if you had 5 years remaining and took the 6-month extension, at the end of this your account will revert back to it’s original state and the term will now be 4 years 6 months remaining). It will be important to consider whether you can make the increased payments after the arrangement ends to ensure that you repay your loan by the contractual term end. We may not agree to a change if the payments after the changes significantly increase.
Will future lending be affected by the interest only/term extension arrangement?
You should be aware that although your account will not be reported to Credit Reference Agencies as being “in an arrangement”, there are other ways lenders will be able to tell if you agreed to interest only payments (e.g. reviewing mortgage or bank statements, or the actual payment amounts recorded by Credit Reference Agencies) which could impact future lending decisions. This will be down to each lenders’ individual checks.
What happens if I am already in arrears or have a temporary payment arrangement in place?
The Charter applies to customers that are currently paying their contractual payment and are up to date. We will continue to support you as long as it is appropriate; however, we will review affordability of any arrangements you have with us, and these arrangements will be reported to Credit Reference Agencies.
If I miss a payment will my home be repossessed?
Repossession is a last resort for serious arrears cases and is rare at Newbury Building Society. For this reason, lenders including the Newbury, have a range of options to support customers. Your home will not be repossessed due to a missed payment.
How am I affected if you have already started, or are about to start possession proceedings?
The Charter gives a commitment that customers will not be evicted from their home within 12 months of their first missed payment. This does not mean that 12 payments must be missed before eviction, it means that a 12-month period since the first missed payment must elapse before an eviction can take place.
It does not stop lenders going to Court to get a possession order or require that proceedings that are already in progress must stop. If it is less than 12-months since your first missed payment, we will defer the actua eviction until the 12-month period is over. If you repay your arrears in the meantime, we will stop the eviction, as would be normal practice.
We will look at cases on an individual basis as there may be exceptional circumstances which means we may not follow our standard practice.
*Exceptional circumstances may include:
when the property is vacant, the borrower is deceased, or voluntarily seeks to proceed
where there is detriment to the borrower in remaining in the property
where there are vulnerabilities such as domestic or financial abuse, threat to life or severe health
Anything else I need to know?
If you can afford to repay your mortgage, it is in your interests to do so.
Paying reduced payments without our agreement, is not a formal Mortgage Charter arrangement.
You should not just fail to pay. This will be counted as a missed payment and will affect your credit report.
If you think you will have long term financial difficulties, please contact us as soon as possible.
MoneyHelper provides a variety of guides and information specifically for those affected by the cost of living. Information includes how to prioritise payments, living on a squeezed income, and using credit wisely. Other third party support is available via our website page ‘mortgage payment problems’.