Mortgage repayment holiday: extension of support for homeowners struggling as a result of coronavirus

Homeowners struggling financially as a result of coronavirus will be able to pause their mortgage payments after the mortgage holiday deadline was extended.

The scheme was due to end on Saturday, October 31. After the announcement of a four-week national lockdown that same day, the Financial Conduct Authority (FCA) proposes to extend the availability of payment deferrals by another six months.

The UK government announced a three-month payment holiday in March at the start of the first lockdown. This was then extended for another three months as the economy continued to be buffeted by the pandemic.

Chancellor Rishi Sunak also announced a temporary suspension of repossession orders during the period.

As a result, the number of home repossessions plunged by 93 per cent in the first half of 2020 compared to last year.

As many as 2.5 million people have already taken a mortgage holiday since the start of UK lockdown.

Borrowers who have not yet had a mortgage holiday under the existing scheme will be able to request a payment break from their lender of up to six months. This should not show up on their credit file.

Those who have already taken advantage of a mortgage holiday will be able to request to extend it or take another one up to a six-month limit.

The deadline for deferral applications will also be extended to January 31, 2021

The FCA say that any homeowner who is still unable to pay their mortgage after six months should contact their lender for a tailored support plan, which may show up on their credit file.

Homeowners should only apply for a mortgage holiday if they are in genuine financial difficulty and a lender will check their paperwork to be sure this is the case.

Borrowers will still accrue interest on their mortgages during a repayment holiday and won’t be making repayments so this will increase the overall balance of the loan in the longer term.

“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 do so. This allows support to be targeted to those most in need,” said Sheldon Mills, of the FCA.

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

Talk to your lender as soon as possible if you’re worried about making your mortgage repayments or fear you might fall into arrears.

“If you find yourself struggling, make a proposal to your lender — you might not be able to afford to pay all your mortgage, for example, but you could offer to pay half. The important thing is to ask for help as early as possible rather than ignoring the issue.

"While lenders should offer support to borrowers, they can only do that if they know there is a problem,” said Mark Harris, chief executive of mortgage broker SPF Private Clients.

Although it shouldn’t happen in the case of borrowers affected by Covid-19, there is a chance that taking a mortgage repayment holiday could also affect your credit file, so Mark Harris’s advice is to make sure you keep a note of any conversations and retain all correspondence in case the lender accidentally marks your holiday as arrears. That way you should avoid any issues when you come to remortgage.

We are working with lenders to ensure enhanced support remains available to borrowers struggling financially following changes in the coronavirus situation across the UK.

‘Tailored support will still be offered and remains the most appropriate option for many borrowers, but we are proposing to extend payment deferrals for additional support. We also want to make sure no one has their home repossessed during this time.

‘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 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.’