Nearly two million mortgage payment holidays handed out so far

Nearly two million mortgage payment holidays have been granted to customers impacted financially by Covid-19, according to trade association UK Finance.

On top of this, its members have offered 27 million interest-free overdraft buffers, provided 961,700 payment deferrals on credit cards and 688,900 payment deferrals on personal loans.

Interest will normally continue to build up during mortgage, credit card and personal loan payment deferrals, unless the lender says otherwise, so customers should consider their options carefully.

The amount borrowed will also still need to be paid off eventually.

For the average mortgage holder, the payment deferral amounts to £755 per month of suspended payments.

UK Finance said one in every six mortgages in the UK is now subject to a payment holiday, with 1.9 million mortgage payment deferrals having been granted.

Many homeowners will soon be coming to the end of their three-month mortgage payment holiday, and lenders are contacting borrowers to ensure they continue to be supported.

Mortgage borrowers could ask for a further full or partial payment deferral, a move to interest-only payments for a period, or to extend the term of the mortgage to reduce payments.

The right option will depend on the borrower’s circumstances.

The Financial Conduct Authority (FCA) is also consulting on proposals which would enable overdraft customers to ask their lender for another three-month interest-free buffer of up to £500 if they need it, when their current one comes to an end.

The FCA will make a further announcement about this soon.

Eric Leenders, UK Finance managing director, personal finance, said: “Lenders understand that many households will continue to see their finances squeezed as the pandemic continues, and we are working hard to ensure everyone gets the support suited to their needs.”