The FCA released “Guidance for firms supporting their existing mortgage borrowers impacted by the rising cost of living” on 10 March 2023.

In this guidance, the FCA stipulates the flexibility that firms have when providing forbearance to their customers and the scope for variation of mortgage agreements.

The FCA has explained that the objective of forbearance is to give customer the time to adjust so that they can pay their mortgage for a long time. They have not defined it as applying to borrowers who may or may not be in financial difficulty, but instead have envisioned forbearance to be an ‘open door’ of support for those who need it.

The FCA has set out that it’s expectations of firms during this time includes:

• Consider what more can be done to encourage borrowers to switch to less costly options, where available;
• Give all borrowers in payment difficulty appropriate forbearance that is in their interests and that takes account of their circumstances;
• Provide all customers with an appropriate level of care and support, taking into account any vulnerability and ensuring they treat vulnerable customers fairly;
• Support borrowers in difficulty by making them aware and helping them access money guidance or free debt advice;
• Ensuring that any fees and charges levied on any borrower because they are in payment shortfall are fair and cover no more than the firm’s costs
• Be transparent with the range of options available to the customer, such as putting them on their website

Essentially, this guidance encourages lenders to be open and proactive in respect of borrowers facing difficulties due to the cost of living crisis and it would seem to suggest that there is now an duty to reach out to those who may face difficulties in advance of any default on payments. It is an extension of the Treating Customers Fairly policy and we will be interested to see if the Court’s interpret whether there is a greater onus on lenders and their representation to try to reach agreements or contract variations in advance of litigation.

You can access the guidance here: https://www.fca.org.uk/publications/finalised-guidance/fg23-2-guidance-firms-supporting-existing-mortgage-borrowers-impacted-rising-living-costs