Martin Lewis: The new mortgage 'forbearance' help – how big a change is it, is it mandatory?
On Friday, the Chancellor, regulator the Financial Conduct Authority (FCA), and bosses of the UK's major mortgage lenders agreed a new package of forbearance measures to help some with mortgage troubles (this was updated on Tuesday 26 June with the mortgage charter).
There are many questions flying around over what this means, so I want to bash out some provisional answers I have.
To set the scene, let me start by repeating the instant formal response I put out five minutes after being told the headline...
Dear Claire Coutinho MP
I asked you on Good Morning Britain about the 80,000 children with special educational needs or disabilities (SEND) whose money, given to them by the state to access at age 18, is locked away, without effective access in Child Trust Funds. While most 18 year olds can simply withdraw the money, in practice for this group of SEND 18 year olds, their parents are unable to access the cash without the substantial pain, stress and cost of the Court of Protection.
You said you'd look into it, and I promised to send you a briefing – which my team have prepared below.
This is a powerful issue. The money in Child Trust Funds was intended to level the playing field, so young people from all backgrounds had some savings behind them when they became an adult.
This is particularly important for children with disabilities, who unquestionably face additional financial challenges in adulthood. Yet it is those most in need who are now being disenfranchised.
I'm aware Government has done a cursory look at this already, but frankly the 'do very little' solution that it came up with isn't good enough. To leave things because it's tricky is a very poor outcome for everyone.
I would ask you to look at this and please champion within Government.
Kind regards
Martin Lewis
Founder, MoneySavingExpert.com
Founder, The Money & Mental Health Policy Institute
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BRIEFING
Tens of thousands of young people with learning disabilities now face being locked out of their own starter savings – and while the Government has looked at some perfectly workable solutions, it has so far failed to meaningfully act to remove these barriers.
More than 80,000 young people with learning disabilities could be affected, as the only way to gain access to their savings is for their parents to go through a costly and time-consuming process through the Court of Protection.
Child Trust Funds were set up in 2005 and designed to encourage children to save for the future, untouchable until the child turns 18. Until 2011, the state gave all parents of children born from 1 September 2002 tax-free vouchers for the accounts, worth £250 both at birth and again on a child's seventh birthday – rising to £500 each time for low income households. Many parents then added to these accounts over the years in the hope of giving their children some financial resilience as they start their adult lives.
However, due to protections put in place by the Mental Capacity Act, the only way for parents of young people with learning disabilities to access this money on their behalf is through a Deputyship Order (DO) via the courts. The same issues also apply to Junior ISAs.
For many – especially the most disadvantaged – the amount of money it costs to gain access to the accounts outweighs the amount saved. Parents need access to legal advice or lawyers, they must have forms filled out by a GP (often at cost), as well as often paying fees directly to the court, and then additional annual fees to the Office of the Public Guardian (OPG) – which can be hundreds of pounds a year. This can add up all-in-all to an initial cost of nearly £1,000 – not including legal help – plus ongoing yearly payments.
But clearly, it's not just about the cost. The time it takes to go through the court is a nightmare for parents who are already often living time-squeezed, stressful, difficult lives – there can be as many as 90 pages of forms to read and fill out, and court delays mean it can take up to 6 months to get the DO. Even then, an already-stretched Deputy also needs to submit reports on financial expenditure every year.
On top of this, those young people with learning disabilities who could benefit from using their funds, but are unable to access them, could also see their Universal Credit entitlement cut if they have more than £6,000 stuck in these accounts.
There are solutions, but the Government has so far not taken any meaningful action. Most recently, the Government decided against implementing the small payments scheme it consulted on – after taking a year to publish its decision and giving many affected false hope – that was a gut punch.
A small payments scheme would allow a person, who could prove their suitability, temporary access to a Child Trust Fund for a 6-month period so they could withdraw up to £2,500 on behalf of the account holder. As access to the account would only be for a short-term one-off period, the person would not need to go through the courts. This is a sensible solution that would help the majority of those affected, as the average amount in an account is just over £2,000.
A second solution is to extend the DWP's appointee scheme – already in place so that parents are able to receive benefits on behalf of their children – to cover Child Trust Funds/Junior ISAs. The amount of money handled by appointees for benefits, in most cases, far outweighs the amount contained in the Child Trust Funds, so it is frustrating to see this overlooked as an alternative.
The Government's preferred approach of increasing awareness through its new toolkit is, quite frankly, a cop out. The toolkit doesn't lighten the financial burden of getting a DO, and it doesn't make much material difference to the time spent or frustration experienced by families forced to go through this process. Furthermore, it does nothing to support the policy's original aim of giving young people – particularly those facing additional life challenges – a leg up and some financial resilience as they enter adulthood.
I urge the Government to rethink its decision against implementing the small payments scheme, and act to help the tens of thousands of young people in this situation.
We have worked with the charity Contact and the campaigner Andrew Turner on this and are thankful for their input.
Additional sources of information:
Contact, Child Trust Fund access issue – progress update and impact assessment, March 2023·
Renaissance Legal, Child Trust Fund Access Campaign – Summer 2022 update, accessed July 2023
I wrote "it looks like" because five minutes is enough to get the big picture but not to thoroughly examine everything. Even now, after a work day and a weekend, we haven't got full answers, but I am a bit further along the path, so I wanted to explain where things are based on some of the things that have been raised.
Q. Has anything really changed here?
Some lenders are saying "we do this anyway" – there's some truth in that, but it can be misleading. Many lenders offer tailored forbearance measures, pushed for by the regulator, that they can put in place when someone is struggling, yet they all do it differently and there are no hard and fast rules. Indeed, we want such tailored measures to continue, but this is something slightly different.
Under the new agreement, firms will give what is effectively a right to all mortgage borrowers with regulated firms, who are up to date with payments, but struggling...
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To move for six months to interest-only, or to extend the mortgage term, in order to lower repayments and give some respite.
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Choosing to do this will not impact your creditworthiness. (Side note: I don't call it a credit score, as credit scores don't really exist.)
The fact this is automatically available from all lenders who've agreed and that it will categorically not impact your credit file is the change. It's worth noting that, especially in the case of term changes, some firms would've seen that as a contractual change, thus not impacted your credit file, but here you have certainty in advance.
This is important both in practice and because it means there can be a clear, universal (sort of, more below) charter of rights for all mortgage holders.
Q. Are there any other changes?
Lenders have also agreed not to push repossessions within a year of the first missed payments, unless the mortgage holder agrees to it.
Also, from 10 July firms have agreed to commit to offering the borrower a new rate six months out from the end of their fix, and the option to switch to a different deal with the same lender if a better option is available before the end of their current deal. This has often been done in the past, but now it is a firm commitment.
It's also been prominently said that you can now "talk to your lender without any credit score impact". That isn't a change at all, though I know the banks were very keen for the message to be put out that people should ask them for help when struggling (a message I support). I suspect this was just seen as an opportunity to get that message out.
Q. Is it worth taking these measures?
These are forbearance measures. They're to temporarily lower monthly repayments to help those struggling to meet their repayments to get over the hump and sort something out.
Over the life of the mortgage though, you'll still pay what you were originally meant to, and likely more, especially if you permanently extend the term (as the longer you borrow for, the longer interest has to accrue).
So these are worthwhile forms of help if you're struggling, and should work and give you a break, but you should only take them if needed. We'll be doing detailed step-by-step help once all the rules are published.
- What I said to the Chancellor: I explain in my podcast and you can also see a transcript
- Mortgage best-buy comparison: Our Mortgage comparison shows what's out there
- Remortgage guide: Help trying to find a new mortgage deal in our 34-page PDF Remortgage guide
- Find a mortgage broker: With rates rocketing, a mortgage broker is a crucial aide for many
- Ultimate Mortgage Calc: How much'll your rate rise, overpaying & more via our Mortgage calc
- Mortgage arrears help guide: Based on the info before these changes, our Mortgage arrears help
Q. What happens after the six months?
If people then want to continue the forbearance, it will be on a tailored basis, and can impact their credit file, just as it can now. The change here is the automatic six-month "get over the hump" issue, what happens after remains.
Of course with rates continuing to be high, this is not going to help everyone. The hope is it will give some people time to readjust their finances. Ultimately though, there is no getting around the fact that for all those on variable rates or coming off fixes, for the immediate future at a minimum, people are going to pay more (as that's the Bank of England's aim – to put up borrowing costs) and some will still face unaffordable bills.
Q. Is the new scheme mandatory?
This is pretty nuanced. Initially, we were told that technically the agreement only covers lenders that were in the room, which includes the chief executives of Lloyds Banking Group, Virgin Money, Santander, HSBC, NatWest Group, Nationwide and Barclays – though that covers a very substantial majority of UK mortgages.
However, other lenders have now also signed up to it, including TSB and many major building societies. You can see the full list in the Charter document on pages 11 and 12. This covers 85% of the mortgage market.
The FCA (which, let's be plain, is what really counts from now on – as the politicians will move on, but the regulator is the one that'll be managing this) tells me that in order to put this in practice it will need to make some enabling changes, some to the rules and some to the guidance. It says much of that should happen this week.
Once that is done, the FCA expects it to be common practice and other lenders to follow suit. Yet even if not, it says that under the new consumer duty starting this July, where all firms will have to be mindful of consumer outcomes, in practice it will expect to see the same outcomes, so in effect this will be mandatory (though we will be keeping an eye to ensure that we monitor any lenders that aren't playing ball).
Also as the Ombudsman adjudicates based on standard industry practice, and this will certainly be that, the likelihood is if necessary (let's hope it doesn't get there) this would be enforceable that way.
Obviously we will keep updating you, and we will be working on a detailed guide to the forbearance measures and the pros and cons.
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20 May 2025
