Mortgage payment holidays have been extended for homeowners who are being financially affected by the ongoing COVID-19 pandemic.
The announcement was made on 31 October 2020, the same day as the scheme was due to end and more than six months after it was introduced.
Lenders started offering mortgage payment holidays for those in financial difficulty due to the virus, initially for three months from 17 March 2020.
More than 1.8 million homeowners used the option to defer mortgage payments as the pandemic deepened in the months that followed.
In May 2020, as the first iteration of the scheme was winding down, Chancellor Rishi Sunak announced an extension until 31 October 2020.
Last week, with the number of COVID-19 cases spiking, the mortgage payment holiday was extended again, this time until 31 March 2021.
Who is eligible?
Borrowers who have not yet had a mortgage payment holiday can request their provider to pause repayments for up to six months.
Those who have already used the scheme to defer payments can extend their mortgage payment holiday until they reach the six-month cap.
People who already had six months of payment holidays are ineligible. They can move on to “tailored support” based on their circumstances.
The guidance remains the same: where borrowers can afford to make mortgage repayments, it is in their best interest to do so.
Sheldon Mills, interim executive director of strategy and competition at the Financial Conduct Authority (FCA) said:
“It is in borrowers’ own long-term interest only to take a payment deferral when absolutely necessary.
“Those that are able to keep paying, should [continue to] do so. This allows support to be targeted to those most in need.”
What is ‘tailored support’?
Those who have already taken a six-month mortgage payment holiday this year and continue to struggle with paying back the loan can apply to their lender for tailored support.
This largely depends on their financial situation and what tailored support is on offer is entirely at the lender’s discretion.
It might be possible to secure a further payment deferral or to negotiate reduced payments, both of which would be short-term options.
Will it affect my credit rating?
Normally, the lender reports missed mortgage payments to credit reference agencies so that when you next apply to borrow credit, other lenders will be able to see the missed payment.
Assuming the borrower was not already in arrears, the first six months of the payment holiday should not be reported as missed payment on the borrower’s credit file. Interest will still accrue on what they owe.
Lenders can, however, find out about missed payments in other ways. For example, they can see if a mortgage balance is not reducing and can use this to help inform decisions about future credit applications.
‘Tailored support’ might be reported on a borrower’s credit file, and the FCA said lenders should inform borrowers where this will be the case.
What do you need to do?
Lenders should prvide information soon on what this means for their customers and how to apply for this support.
The FCA has said borrowers have until 31 January 2021 to submit a claim for a payment holiday to their lender.
Applicants will be able to apply for an initial three-month payment holiday, with the option to extend it for another three months afterwards.
“We are asking borrowers not to contact their lender yet, and instead wait for further updates, including from their lenders, soon.”
It also said nobody will have their home repossessed by their lender until on or after 31 January 2021.
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