New mortgage-related measures to ease the situation for struggling homeowners have been broadly welcomed.
But one finance expert said it would be “unlikely to stem the tidal wave of worry” that homeowners are facing.
Lenders representing more than 75% of the market have agreed to a “mortgage charter”, providing support for residential mortgage customers, following a meeting with Chancellor Jeremy Hunt on Friday.
Borrowers will be able to switch to an interest-only mortgage for six months, or extend their mortgage term to reduce their monthly payments and switch back to their original term within the first six months, if they choose to.
Both options can be taken without a new affordability check or it affecting their credit score.
Lenders have also agreed to implementing a 12-month minimum period before repossessing homes.
Reena Sewraz, a Which? money expert, said: “With many mortgage holders understandably concerned about how they will meet higher repayments amid rising interest rates, it’s crucial that lenders offer appropriate and tailored support to their customers.
“It’s positive to see banks agreeing to delay repossessions without consent by at least 12 months and allowing mortgage holders to make temporary changes to the terms of their deal, which could help to create some breathing space for those worried about their situation.
“However, switching to interest-only payments or extending the term of a mortgage won’t be right for everybody so it’s still important to take time to speak to your lender, understand your options and help find what is right for you.
“Banks are obliged to offer support to customers experiencing difficult times and if borrowers are struggling to meet repayments, they should talk to their lender quickly.
“Doing so will not affect your credit rating and is preferable to missing a payment. The Financial Conduct Authority should be monitoring the situation closely to ensure firms are offering customers the service they need.”
Laura Suter, head of personal finance at AJ Bell, said: “The Government is balancing on a wafer-thin tightrope – if it offers too much help to homeowners that could undermine attempts to tame inflation through increased borrowing costs, but if it does nothing it looks heartless as some people face losing their homes.
“With the backdrop of a looming general election the Government is under huge pressure to fix the economy without alienating voters.
“This deal with mortgage companies strikes a middle ground – it offers some support to those homeowners hardest hit, but not so much that it should boost inflation.
“For those who are struggling to pay their bills it means that a temporary switch to interest-only payments, or extending the term of the mortgage, can easily be reversed if their finances improve.”
Alice Haine, personal finance analyst at investment platform Bestinvest, said: “Protecting struggling mortgage borrowers from having their properties repossessed in the short term may offer some relief to those fearful of what the future holds – but is unlikely to stem the tidal wave of worry flooding over Britain’s homeowners right now.”
She added: “Whether it is a first-time buyer trying to get a foot on the property ladder or someone remortgaging in the next 12 months, or even in three years’ time, mortgage costs are top of the financial concern list for many.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “This announcement was expected and is welcomed.
“The payment shock is only affecting a small percentage of homeowners but any help to reduce stress is positive.
“My only question is – is six months long enough? What’s going to change in six months’ time?”