JERSEY’S banks have agreed to ‘operate within the spirit’ of a UK package of measures which aims to help homeowners facing a so-called ‘mortgage timebomb’.
Rocketing interest rates have pushed monthly payments on tracker and variable mortgages up by hundreds of pounds – leaving many people across the British Isles on the brink.
And thousands of homeowners coming off fixed-rate deals taken out when the base rate was at a historic low are now facing paying thousands more each year.
Last month, in an effort to ease the financial pain being felt by many, the majority of lenders in the UK, including NatWest, Lloyds and Barclays, signed up to the Mortgage Charter.
The initiative, agreed by the UK government, lenders and the Financial Conduct Authority, sets down a number of commitments to help those struggling to keep up with payments.
These include allowing customers to lower their monthly costs by switching to interest-only payments for six months, or extending a mortgage term.
Earlier this month, Deputy Elaine Millar (pictured below), the Assistant Chief Minister with responsibility for financial services, wrote to Jersey’s banks, asking them to confirm whether they would be following the charter.
This came after the Bank of England raised rates to 5% in a bid to reduce stubbornly high inflation.
Now, the Jersey Bankers’ Association, which represents most of the Island’s banks, has responded to Deputy Millar, saying that its members were ‘keen to confirm that they would always wish to work with their customers to ensure positive outcomes in all matters’.
The letter continued: ‘This includes where customers are in any form of financial distress, whether this relates to a mortgage or any other financial service.
‘Our members’ recommendation is for customers to approach their lender as soon as possible if they are concerned in any way about their mortgage in order that the position can be reviewed and appropriate action taken.
‘Whilst not party to the “UK Mortgage Charter”, our members certainly wish to operate within its spirit.’
Deputy Millar said she was satisfied with the response and that it was a ‘consistent, concerted response from the industry’.
She added: ‘Three banks have come back to me directly and all said, as we would have hoped, that they will be working with customers, as they did during the pandemic, to support people when times are hard.
‘They have also explained that they are careful to stress-test every loan they provide. For example, if they provide one at 4%, then they run the calculations based on if the rate went up.
‘They have further confirmed that repossession is the last resort, and they will go through all the other options first. No bank wants to put people out on the street.’
In the States sitting this week, Deputy Geoff Southern’s bid to ensure a 12-month grace period for Islanders struggling with their mortgage payments – as was agreed in the UK – was rejected by 24 votes to 19.
Ministers did not support it on the grounds that the government had already done what the proposal was asking, by writing to local lenders, and would continue to do so.
Deputy Millar said: ‘It’s not even that we’ve done it and that’s it, but it’s very much an ongoing piece of work. We don’t think that there’s an immediate need to do anything more than engaging with the banks.’
But Deputy Southern has again shot back at the government’s approach, saying: ‘It is interesting to see the government so reliant on mortgage lenders acting to fix the broken mortgage market.
‘The ministers have crossed their fingers in the hope that the worst is over, but there could be further rises from the Bank of England.’
All UK lenders have agreed:
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Support for customers who are up to date with payments to switch to a new mortgage deal at the end of their existing fixed-rate deal without another affordability check. Lenders will provide well-timed information to help customers plan ahead should their current rate be due to end.
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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.
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Anyone worried about their mortgage repayments can contact their lender for help and guidance, without any impact on their credit file.
