Lenders have been ordered to extend their support for mortgage holders affected by Covid-19 by the regulator, the Financial Conduct Authority.
Back in March lenders introduced mortgage payment holidays, which allow people to withhold from paying their mortgage – and by June one in six mortgages were subject to a payment holiday (UK Finance).
While these holidays mean the cost of the loan will be slightly higher once people have to resume paying their mortgage, as interest is added to the size of the loan, it’s given some people a much-needed reprieve if their income has been hit by the pandemic.
However the deadline for mortgage payment holidays is the end of October, prompting the FCA to publish fresh guidance for lenders.
While borrowers need to apply before the end of this month to take out a holiday, it seems lenders will continue offering assistance after then.
The next step
The FCA has told financial firms to support customers before it gets to the stage where they miss their payments.
Actions they could take include suspending, reducing, waiving or cancelling further interest or charges, permitting a customer to make no or reduced payments, as well as agreeing a payment plan.
The regulator added that firms should offer a range of shorter and longer-term options, depending on customers’ circumstances.
In a way then, it seems mortgage lenders will still continue offering support like the mortgage payment holiday in future to avoid the wrath of the regulator.
The FCA also told mortgage lenders how to treat interest-only or part-and-part (where part of the mortgage is repayment and part is interest-only) customers whose deals are set to mature.
These customers, provided they are up to date with repayments, won’t be expected to pay the capital on the mortgage until 31st October 2021, meaning they have a full year’s reprieve on having to come up with this cash.
Communication is key
For mortgage holders experiencing difficulties the key is to communicate with your lender, or another financial professional like a broker, whether you’ve already taken out a holiday or not.
In the current climate it’s totally understandable for homeowners to have financial problems or worries, so lenders would likely be more supportive than usual, even without the FCA’s guidance.
According to the regulator almost a third (31%) of adults have seen their income fall due to the pandemic, so if you’re one of them you’re hardly alone – and support will continue.