These changes follow the Bank of England’s decision to raise the base rate to five percent.
This jump means that thousands of people face an increase in mortgage payments that they may not be able to afford, resulting in risks of repossession.
London Mayor Sadiq Khan said: “Some Londoners are now at serious risk of losing their homes, causing huge stress and anxiety for many households in the capital.
“Mortgage rates are now routinely in excess of six percent.
“Homeowners coming to the end of fixed-rate deals face exorbitant increases in their monthly outgoings, and it is sadly inevitable that many people will be unable to manage the jump in payments.
“Without support there is a risk of rising arrears and ultimately, a wave of repossessions.”
In response, Chancellor Jeremy Hunt announced that a repossession holiday will be set up to avoid people from losing their homes.
This means lenders will have to give customers at risk of having their home repossessed 12 months’ grace, from the point of the first missed payment.
However, it should be noted the new rules only apply to 75 percent of mortgage lenders, and landlords with buy-to-let mortgages are excluded.
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Charities are urging people to seek out for help if they don’t think they can pay their mortgage payments.
Citizens Advice gives a full list of the changes which one’s lender may be able to provide for those struggling to make payments.
On their website, it states: “Lenders have to treat you fairly and consider any request you make to change the way you pay your mortgage.
“Depending on your circumstances, your lender might offer you the option to:
- change when you pay – you might be able to take a break from paying your mortgage
- repay what you owe at a later date – you could arrange to have what you owe added to the capital outstanding on the mortgage. This is called ‘capitalising the arrears’
- reduce the amount you pay for a short period of time – you might be able to pay less towards your mortgage for the next few months
- repay your mortgage over a longer period – this is called extending the mortgage term
- reduce your monthly interest payments – you might be able to negotiate a lower interest rate if you have equity in your property
- change to interest-only payments – this is where you only pay off the interest on what you borrow each month
- switch to a cheaper mortgage – you might be able to reduce your payments by changing to a fixed-rate mortgage.”
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Mr Hunt announced in total three changes to help mortgage holders with their inflated payments.
Britons are reassured that seeking advice won’t impact credit scores, and homeowners can temporarily change their mortgage plans!
Lastly, there is now a 12-month period before home repossession.
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