Mortgage holiday set to be extended

Homeowners whose finances have been affected by COVID-19 can apply for a mortgage payment holiday for up to six months without it affecting their credit file, despite plans to end this type of financial support on 31 October.

This follows the announcement of a new national lockdown, starting on 5 November.  Two million homeowners have taken out mortgage payment holidays since the start of the coronavirus outbreak.

From 1 November, banks were due to offer a range of short and long-term support options to borrowers, although those who needed extra support would have this reflected on their credit reports.

But following the Prime Minister’s announcement on 31 October, HM Treasury has confirmed that ‘borrowers who have been impacted by coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday’ and that those that ‘have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.’ The Financial Conduct Authority.

Those who have already taken a six-month mortgage holiday will and ‘are still experiencing payment difficulties should speak to their lender to agree on tailored support.’

The Financial Conduct Authority said on Monday that further relief would now be offered to struggling mortgage borrowers, and set out a similar package of measures for users of consumer credit.

Customers who did not take a mortgage holiday after the spring lockdown was introduced may now seek a break from repayments of up to six months if they are in financial difficulty. Borrowers who have already had one payment holiday of fewer than six months will be allowed to extend that deferral up to the maximum half-year period.

But the FCA said borrowers who have already taken a full six-month payment holiday this year and need further help will have to speak to their lenders to agree on an alternative form of “tailored support”. Customers who foresee longer-term financial difficulties are advised to do the same.

Guidance over the summer from the regulator suggested tailored support could involve accepting reduced payments or restructuring a mortgage term.

Users of consumer credit products — including personal loans, credit cards, motor finance, rent to own, buy-now-pay-later, pawnbroking and “payday” lending deals — were also told on Monday that payment deferrals could now be extended to six months.

New applicants may seek payment holidays of up to six months, while those who took a three-month payment deferral under the FCA’s July guidance may apply for a second deferral.

UK Finance, the banking trade body, said that lenders would tell borrowers how to apply for new payment holidays in coming days. “Customers seeking to access this support do not need to contact their lenders yet,” explained Eric Leenders, managing director of personal finance at UK Finance. “Lenders will provide information after today on how to apply for this support.”