Further support for mortgage customers

Homeowners who are struggling to meet their mortgage repayments because their incomes have fallen can take a break from payments for up to six months, under new plans to extend the availability of payment deferrals announced by the regulator.

According to charity the Joseph Rowntree Foundation, around 1.6m borrowers are worried about whether they’ll be able to pay their mortgage over the next three months.

The Financial Conduct Authority (FCA) is proposing that borrowers who are experiencing payment difficulties due to coronavirus should be able to take a break from repayments for two three-month periods, so up to six months in total. Those who have already had a mortgage payment holiday of up to three months will be eligible to defer payments for a further three months if they need to.

Homeowners who have already started making mortgage payments again following a payment holiday will also be able to apply for another payment break of up to three months.

Under the FCA’s new plans, borrowers will now have until 31st January 2021 to request a payment deferral.

Impact on credit files

Payment holidays won’t be included on mortgage customers’ credit files, but that doesn’t mean taking one won’t affect your ability to borrow in future. Lenders usually take a wide range of information into consideration when deciding whether to offer a mortgage, so if you’ve had a payment holiday, this could indicate that you’ve experienced financial difficulties in the past.

Sheldon Mills, interim executive director of strategy and competition at the FCA said: ‘‘It is in borrowers’ own long-term interest to take a payment deferral when absolutely necessary. Those that are able to keep paying, should do so. This allows support to be targeted to those most in need.

“We are also asking borrowers not to contact their lender yet, and instead wait for further updates, including from their lenders, soon.”

The FCA is also proposing that property repossessions won’t go ahead without agreement from the property owner until after 31st January next year.

Help for those who aren’t eligible for another payment break

Not all mortgage customers will qualify for a payment break.

Those who won’t be able to apply for one include homeowners who have already had two payment breaks totalling up to six months, and those who’ve agreed alternative support with their lender. Lenders may for example, have agreed with these customers to temporarily change mortgage payments to an interest-only basis to keep costs down, or to extend the mortgage term to reduce monthly payments.

Tailored support measures such as these will usually be reported on a borrower’s credit file, and lenders must let them know that this will happen.