Some of the UK’s largest banks have agreed measures with the government to help struggling borrowers as they brace for a surge in late mortgage payments.
The so-called forbearance measures, which were used during the 2008 financial crisis, are an attempt by banks including HSBC, Barclays, Lloyds Banking Group and NatWest to avoid repossessions and more pain for borrowers on top of soaring inflation and high energy bills. Some measures could include switching mortgage holders to interest-only deals or moving them on to competitive fixed-rate deals without having to take another affordability test. The move follows a meeting this month between Jeremy Hunt and the UK’s largest banks, when the chancellor made clear lenders would need to help struggling homeowners repay their debt. It highlights the difficult time ahead for borrowers with about 1.8mn people in Britain needing to remortgage next year as their existing fixed-rate deal comes to an end, leaving them with the prospect of much higher costs. One of the bankers at the recent meeting said the tone was “lean in to help, which we all are. The last thing any bank wants to do is repossess a house.”
UK lenders are already preparing to set aside further provisions in their full-year results in February to cover the expected increase in loan losses as more borrowers struggle with their mortgage repayments. But Nigel Terrington, chief executive of Paragon Bank, said: “Banks are likely to achieve strong profit growth this year, so the extra provisioning will be affordable.” According to the banking industry body UK Finance, the number of mortgages in arrears is predicted to reach 98,500 next year, up from an estimated 80,100 in 2022.
The number of housing transactions is also likely to drop as prices fall and home movers in particular grapple with the prospect of taking out a costlier mortgage.