Britain guides banks on mortgage flexibility in cost of living crisis

LONDON (Reuters) - Britain's financial watchdog published draft guidance on Wednesday for lenders to help customers finding it difficult to make payments on mortgages during the cost of living crisis.

The Financial Conduct Authority's draft guidance sets out a range of options banks have to support customers, including forbearance, a measure made available during the COVID-19 pandemic when the economy went into lockdown.

"It sets out the flexibility firms have when providing forbearance to those who need it, and the scope firms have to vary contract terms for other borrowers who want to reduce their monthly payments," the FCA said in a statement.

In forbearance, firms may offer payment concessions where they agree to accept less than the contractual monthly instalment - resulting in a payment shortfall - but they may also offer contract variations such as term extensions and temporary switches to interest-only, the FCA said.

(Reporting by Huw Jones; editing by Carolyn Cohn)