Britain Urges Banks To Offer Mortgage Flexibility In Cost-of-living Crisis

Britain has called on banks to support households finding it difficult to make payments on mortgages during the cost of living crisis.

Finance minister Jeremy Hunt told banking bosses at a meeting on Wednesday he expected them to help borrowers, while the Financial Conduct Authority laid out options the regulator said lenders should adopt to ease the strain.

"We expect every lender to live up to their responsibilities and support any mortgage borrowers who are finding it tough right now," Hunt said in a statement after the meeting.

Attendees included NatWest Chief Executive Alison Rose, Nationwide CEO Debbie Crosbie, HSBC UK CEO Ian Stuart, Lloyds CEO of consumer lending Jasjyot Singh, consumer campaigner Martin Lewis and FCA Chairman Richard Lloyd.

The lenders agreed to offer support such as switching to cheaper fixed rates without a new affordability test, extending a loan or lowering monthly payments, the finance ministry said.

The FCA, in draft guidance on Wednesday, also laid out similar options it said banks should offer customers.

However, the proposals stopped short of the forbearance package offered to borrowers in COVID-19 pandemic lockdowns, which included widespread payment holidays.

Britain is facing an economic crunch that official budget forecasters predict could mean households face a record hit to living standards over the next two years.

Political turmoil in Britain under the short-lived premiership of Liz Truss also forced up the cost of borrowing and led lenders to hike mortgage rates, although some have edged down since markets calmed under Prime Minister Rishi Sunak.

After years of rising house prices, signs of strain are starting to appear in the housing market. Prices slid last month by the most since the global financial crisis, mortgage lender Halifax said on Wednesday.

In its draft guidance, the FCA also said firms may offer payment concessions, adding that lenders did not have to reassess affordability when changing a mortgage contract to reflect forbearance.

The FCA announced a short public consultation on the guidance until Dec. 21.

"Firms may offer a range of contract variations to support borrowers who would like to reduce their monthly payments, and our rules allow this regardless of whether customers are facing payment difficulties," the FCA said.

"We will consider if there are further steps we can take to help firms to support their borrowers, including at scale."