Last year's agreement by the main banks for a one-year moratorium on house repossessions will not automatically be renewed - instead it will be revised.

Under proposed changes to its statutory code, the Financial Regular is recommending that the moratorium should be extended beyond the initial 12 months only when a homeowner meets repayments agreed with their lender after a debt resolution process begins.

Under the new code, lenders will introduce an agreed mortgage-arrears resolution process and homeowners who enter the process will be able to agree new repayment terms with banks and building societies and benefit from a one-year moratorium on home repossession.

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When the new system allowing homeowners with mortgage arrears to agree new repayment terms was announced last month, Financial Regulator Matthew Elderfield committed to producing proposals for an updated statutory code before the end of August.

The proposals are likely to incorporate much of the code agreed last month and will put forward a number of new proposals.

Under the code, banks and building societies cannot charge those involved in a resolution process extra interest or penalties and they are prohibited from changing the terms of low-interest tracker mortgages to increase repayments.

(BMcC/KMcA)