Further support for mortgage borrowers affected financially by coronavirus
The window for home owners to ask for mortgage payment holidays is set to be extended, as part of support measures as lockdown restrictions are tightened.
The Financial Conduct Authority (FCA) said it will propose updates on November 2 to its guidance on supporting mortgage borrowers.
To help those financially affected by coronavirus, the FCA will propose that mortgage borrowers who have not yet had a payment holiday can request one – potentially lasting for up to six months.
Under the proposals, borrowers who already have a payment deferral for a period of less than six months would be able to extend that deferral. This would mean customers would be able to have a payment holiday for a maximum of six months.
Borrowers were previously given a deadline of October 31 2020 to apply for a mortgage payment holiday.
After this date, lenders would give support on a more tailored basis, which may potentially be reflected on borrowers’ credit files, the FCA previously said.
The Treasury said on Saturday borrowers will be able to top their mortgage payment holiday to up to six months without this being recorded on their credit file.
The FCA said borrowers should only take up support if they need it. Taking a payment holiday can cost more in the long run as interest will still build up and the loan will still need to be paid off.
The FCA said it will work with trade bodies and lenders on how to implement new guidance as quickly as possible.
In the meantime, it said lenders should not be contacted just yet. Lenders will provide information soon on what this means for their customers and how to apply for this support.
Mortgage borrowers who have already had a six-month payment deferral and are still experiencing payment difficulties should speak to their lender to agree tailored support, the FCA added.
Tailored support, which depends on a borrower’s circumstances, could include deferring payment of the interest or the sums due, extending the mortgage term or switching temporarily to interest-only payments.
The regulator said it is also considering the implications for consumer credit, which includes products such as overdrafts, personal loans and credit cards.
It said that given the variety of different products in this sector, it is working quickly with industry to determine whether a similar approach should be adopted for consumer credit products.
Recent figures from UK Finance show around 162,000 mortgage payment holidays are in place, down from a peak of 1.8 million in June.
A further 97,300 payment deferrals are in place on credit cards and 64,400 on personal loans.
Initial industry analysis suggests that over three-quarters of customers whose payment deferral has come to an end have now returned to making repayments, UK Finance said previously.