UK mortgage lenders have met with the Chancellor and agreed to offer more flexibility to homeowners struggling to cope with soaring interest rates.

After the Bank of England (BoE) yesterday announced another base rate increase to 5%, a rise of 0.5 percentage points on its previous level and the thirteenth meeting in a row that has seen interest rates climb, Jeremy Hunt met with several leaders of financial institutions at Downing Street today including Lloyds, NatWest and Barclays.

BBC News has reported that borrowers will be able to make a temporary change to their mortgage terms, then will be able to return to their original deal within six months. The move will allow some to have lower repayments for a short time, by just paying the interest on the home loan.

Hunt has also stated that the temporary flexibility on switching terms would not affect credit scores.

Lenders have also agreed with the Chancellor that the repossession break should be introduced – similar to the one implemented during the COVID pandemic. There will now be a 12-month delay before taking repossession proceedings against borrowers unable, or unwilling, to pay over the long-term.

According to BBC News, bank chief executives had described the talks with the Chancellor as a “productive” meeting when they left Downing Street.

This was echoed by mortgage expert at Quilter, Karen Noye, who commented: “Today’s talks between bank executives and Chancellor Jeremy Hunt have finally yielded some slightly positive news for mortgage borrowers concerned about how they are going keep up with payments as interest rates continue to soar.

“The discussions have resulted in increased flexibility and support measures aimed at alleviating the financial burden on borrowers. For individuals worried about their mortgage payments, it is essential to understand the available options and take proactive steps to manage their finances effectively.

“One significant development arising from the talks is the temporary change in mortgage terms offered by lenders. Borrowers will now have the opportunity to make adjustments to their mortgage terms for a short period, such as switching to interest-only payments. This change can provide immediate relief by reducing monthly repayments.

“Importantly, borrowers can later return to their original mortgage deal within six months, ensuring continuity and stability while not impacting their credit score. Hopefully this can give people a bit of breathing room to find additional streams of income or get their finances in order.”

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