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Mortgage payment holidays extended for three more months



Those struggling to pay their mortgage due to coronavirus will be able to extend their payment holidays for three more months, or start making reduced payments, the financial regulator has confirmed.

The Financial Conduct Authority (FCA) published draft guidance last month with proposals for helping those with mortgages, including extending the application period for an initial mortgage holiday until 31 October 2020, so that customers who haven't had a payment holiday and are experiencing financial difficulty would be able to ask for one up to this date.

The measures proposed have now been confirmed after a brief consultation and the guidance will come into force from this Thursday (4 June).

What the FCA expects mortgage lenders to do

Here's a full rundown of the new rules being put in place by the FCA:

  • If you've not had a mortgage payment holiday, you'll have until 31 October 2020 to apply. Customers who are making repayments now but get into financial difficulty later will be able to request a payment holiday until 31 October.

  • If your payment holiday's ending, you can ask for another three months if you're still struggling. Lenders should continue to support customers who have already had a payment holiday where they need further help, unless granting a further mortgage holiday would create its own financial difficulties. 

Firms are expected to contact customers on mortgage payment holidays and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this, firms should consider a further three-month payment holiday.

  • If you can make full or partial payments, you should do so. At the end of a payment holiday, firms should find out if customers can resume payments, or part payments. If so, your lender should contact you to agree a plan on how the missed payments will be repaid, which could include spreading the cost of payments over the remaining mortgage term, or extending the mortgage term.

  • The current ban on repossessions of homes will continue until 31 October 2020.
 
  • Payment holidays and partial payment holidays won't go down as a missed payment on your credit file. However, the FCA says that consumers should remember that credit files aren't the only source of information that lenders can use to assess how creditworthy someone is. MSE revealed last month that taking a mortgage or other payment holiday could still have an impact on future credit applications. 
The FCA adds that these rules are minimum standards and that they don't stop firms from going above and beyond, for example by offering reduced interest.

Buy-to-let mortgages aren't technically covered as they're not regulated by the FCA. Yet if a lender is regulated for its residential mortgage business, the FCA says it also looks carefully at how these firms carry out their unregulated buy-to-let business, so it's hoped that some mortgage lenders will offer the extensions to their landlord customers too.

What does the FCA say?

Christopher Woolard, interim FCA chief executive, said: "The measures we have confirmed today will mean anyone who needs to can get help from their lender, if they are still struggling to pay their mortgage due to coronavirus.

"It is important that if a consumer can afford to restart mortgage payments, it is in their best interests to do so. Customers should talk to their firm about the best option available for them."
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