Mortgage holiday: Payment freezes to end next month – 'we are not out of the woods'

Mortgage holidays allow holders to effectively pause their repayments for up to three months if they’re struggling due to coronavirus. These payment freezes can be claimed up until October 31 under current plans and today the FCA has published additional guidance for firms to follow.

This new guidance aims to ensure that customers who have benefitted from payment deferrals under the current guidance will get continued support as the scheme winds down if they’re still struggling.

Specifically, the measures mean firms will offer further short and longer-term support reflecting the circumstances of their customers.

This could include extending the repayment term or restructuring of the mortgage

Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track.

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The FCA appears to be keen to monitor this as they detailed that they will be following firms decisions closely to ensure that borrowers are treated fairly.

The regulator also offered clear outlines of how these arrangements will affect credit files, as they confirmed: “Where borrowers have taken, or are taking, payment deferrals under our existing guidance and require further support from lenders these further arrangements can be reflected on credit files in accordance with normal reporting processes.

“This also applies to borrowers newly affected by coronavirus who receive support from their lender after October 31.

“This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending.

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“Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.”

“Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.”

While the additional support will likely be welcomed by many, the regulator went on to stress that mortgage holidays in of themselves will not be extended beyond October.

As they concluded: “The FCA’s current guidance published in June will continue to provide support for those impacted by coronavirus until October 31 2020 – with consumers able to take a first or second three-month payment deferral until this date.

The June guidance is due to expire on October 31 and we do not intend to extend this guidance.

“The guidance published today ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or they are newly affected by coronavirus after October 31.

“However, we will keep the guidance under review and if circumstances change significantly, consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic.”

To apply for a mortgage holiday borrowers will need to contact their lender directly.

The lender involved will discuss the options available to the borrower but it should be remembered that interest will likely accrue throughout the payment freeze, meaning that repayments will likely increase once the agreement ends.



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