I am regularly asked by friends what they should do as they approach the end of their fixed-rate mortgage.
As many of you know, roughly a third of people rent, a third own outright and a third have mortgages. Of these, 1.4 million fixed-term mortgages are set to end this year.
Mortgage payments are forecast to rise substantially. For example, an increase from 2% to 6% on a 25-year capital and repayment mortgage of £100,000 means a rise in monthly payments from £424 to £644.
On top of the mortgage (and rent) payment hardship, prime minister Rishi Sunak has hinted he will ignore recommendations for public sector pay rises, saying “workers need to recognise the economic context we are in.”
Food inflation running at 18% only adds to this profound cost-of-living crisis which will change society and force people to make hard financial decisions.
For years, my IFA firm dealt with the financial enquiries sent to the Daily Mirror
Against this difficult backdrop, I am pleased around 85% of UK mortgage lenders have recently agreed to a new government charter to support those facing rising mortgage costs.
Borrowers may contact their lender for help, without impacting their credit file. The charter also enables those who are up to date with payments to switch to a new mortgage when their fixed term ends without a new affordability check.
For those in great difficulty, there will be no evictions less than a year from the first missed mortgage payment except for under “exceptional circumstances”. Further definition will be in the final Financial Conduct Authority rules.
Financial advisers have a long history of providing pro bono work to the public. For years, my IFA firm dealt with the financial enquiries sent to the Daily Mirror. Most required looking at expenditure against income to reduce spending or securing a lesser debt interest rate away from expensive mortgages or credit cards.
There are millions of people who think they have nowhere to turn aside from online or the phone for advice
Would I offer this service again? Yes, I would. In my view, this is a perfect learning ground for trainee advisers in dealing with real people; strangers with financial needs. Plus, I know what we provided resulted in good financial outcomes for many hundreds of people.
Today’s world revolves around digital solutions for debt, credit and balancing the books. For financial advice, I believe there should be at least one face-to-face meeting. This helps to build trust between the adviser and client, forming a long-term relationship.
It is so sad that there are millions of people, especially with increasing bank branch closures, who think they have nowhere to turn aside from online or the phone for advice.
Why should advisers bear the whole cost of helping those in financial trouble?
In these difficult economic times, it is more important than ever for regulated advisers to provide pro bono advice. After all, they are the only advisers that can provide client specific advice across most financial products.
Support from providers and regulators should be made available, though. Why should advisers bear the whole cost of helping those in financial trouble, many who will have a small pension and some savings?
Kim North is managing director at Technology & Technical
In any ideal world, or the world of Trust or Competence these lenders should not have to sign up to A N Other charter claiming competence or integrity as happens in the industry of insurance and the industry of banking (such as Natwest Group NWG their Board of Directors and Chairman – who appear ot have been asleep at the wheel whislt it appears the Dame of Dundas House has been cast adrift as the “front” of NWG run by Chairman and ex CEO of the FCA ?