Chancellor Jeremy Hunt has said mortgage borrowers will not have their credit score affected if they struggle to meet repayments.
The move follows a meeting between Hunt and the heads of the UK’s leading mortgage lenders this morning.
Banks have also agreed to give more flexibility in their mortgage terms allowing a temporary six-month change before returning to the original agreement.
Anyone at risk of repossession will also be able to delay any move by their lender for twelve months.
“The most significant thing is that they can pick up the phone to their bank or mortgage lender and talk about their situation without any worry that it will impact their credit score,” Hunt said.
“If they decide to make their payments easier by extending the period of their mortgage, or by going to an interest-only package, they can go back to their original package without any questions asked, without any impact on their credit score, within six months.”
Restructuring a mortgage with lower monthly payments will mean more interest is paid as a loan will take longer to be repaid.
Mortgage lenders have rushed to raise rates again after the Bank of England yesterday hiked interest rates to 5% to curb inflation.
Rates have jumped to more than 6% on a typical two-year fixed-rate mortgage, almost double the rate a year ago.
Attendees at the meeting included NatWest chief executive Alison Rose, Lloyds CEO Charlie Nunn, Virgin Money’s David Duffy, Nationwide’s Debbie Crosbie and Mike Regnier of Santander UK.