Mortgage payment holidays could be extended

Borrowers who are experiencing financial difficulties due to coronavirus should continue to receive support from lenders once their payment holidays finish, under new draft guidance from the financial services’ conduct regulator. Mortgage payment holidays were first introduced in March to help those financially affected by the pandemic. Originally, they were designed to last up to three months, but the scheme was extended so that homeowners could take a further three months off payments, where appropriate. Homeowners who haven’t already taken a payment holiday can apply for one up until 31st October. The Financial Conduct Authority (FCA) has published draft guidance for lenders to ensure that those who would struggle to repay their mortgages once payments resume will receive “tailored support” to help them through the challenges they face. Christopher Woolard, Interim Chief Executive at the FCA, said: “It is important that consumers who can afford to resume mortgage payments should do so. However, we understand that borrowers facing payment difficulties because of the pandemic will continue to face uncertainty and may also experience temporary interruptions in income. “We are proposing that firms contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track. Firms should not take a ‘one size fits all’ approach.”Possible options
Options that lenders could offer borrowers suffering financial problems may include extending their mortgage repayment term to reduce the cost of their monthly payments, or restructuring the mortgage to make payments more manageable. Lenders should also be prepared to extend payment holidays so that borrowers make no or reduced payments for a specified period to give them more time to get back on track financially. Borrowers choosing this option should be made aware that it will be reflected on their credit file under the proposed guidance, which could make it more difficult for them to remortgage in future. The FCA said that lenders should also provide borrowers with any support they might need in managing their finances, including through self-help and money guidance, and referring borrowers to debt advice where appropriate.