Further support for mortgage borrowers struggling financially due to Covid-19
Mortgage borrowers who continue to face payment difficulties due to the impact of coronavirus will be able to get further support tailored to their needs in the coming months, the City regulator has confirmed.
Current guidance, which will expire after October 31, allows mortgage holders to ask lenders for payment holidays if they are struggling to meet their regular payments due to their finances being temporarily affected by Covid-19.
On Monday, the Financial Conduct Authority (FCA) published additional guidance for firms so they can target those most in need with help which will be based on individual circumstances.
Some customers may still be facing payment problems, while others may be struggling for the first time.
Depending on a customer’s circumstances, this could mean short or longer-term support.
Where people need further short-term support, firms can continue to offer borrowers arrangements for making no or reduced payments for a specified period, to give customers time to get back on track, the FCA said.
Or the support may be longer term, and include extending the repayment term of the mortgage, for example.
Customers asking for support will need to bear in mind that they could end up paying more in the longer term as interest builds up on the outstanding debt.
They will also need to consider any implications for their credit files – which may affect their future ability to borrow.
The FCA said that where borrowers have taken, or are taking, payment deferrals under its existing guidance and require further support from lenders, these further arrangements can be reflected in credit files “in accordance with normal reporting processes”.
It said this also applies to borrowers newly affected by coronavirus who receive support from their lender after October 31.
The regulator said this will help to reduce the risk of unaffordable lending. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.
The FCA said its new guidance will come into force from Wednesday September 16.
Christopher Woolard, interim chief executive at the FCA, said: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. Consumers in these situations will benefit from firms providing them with tailored support.
“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”
Under the new guidance, firms should prioritise support for borrowers who are at most risk of harm, or who face the greatest financial difficulties.
The FCA said companies should deliver outcomes that are right for individual borrowers rather than adopting “one size fits all” solutions.
It will be monitoring lenders to ensure borrowers are treated fairly having regard to their individual circumstances.
Firms will also signpost borrowers to the support they need in managing their finances, including through self-help and money guidance, or refer borrowers to organisations that can provide free debt advice if this meets their needs and circumstances.
The FCA said its current guidance, which was published in June, will continue to provide support for those affected by coronavirus until October 31, with consumers able to take a first or second three-month payment deferral until this date.
It said the new guidance it published on Monday will ensure that people can still get support after their payment holiday ends or if they are newly affected by coronavirus after October 31.
The FCA said it will keep the guidance under review and, if circumstances change significantly, it will consider any further measures that may be needed to support people during the ongoing pandemic.