As part of the measures introduced at the start of the Covid-19 lockdown and in an attempt to help people with mortgages manage their cash flows during this precarious time, many lenders have offered their borrowers short-term mortgage payment holidays. If you have not already done so, you have until the end of October 2020 to apply.

If you have applied previously, but would like to extend the holiday then you may do so but there is no guarantee that an extension to such a holiday will be granted.

Of course, just because you may be able to obtain a mortgage payment holiday, this might not be your best course of action. If you are still able to make payments then not taking a holiday will almost certainly save you money. Based on an outstanding balance of £150,000 over a 25 year term, on an initial rate of 2.52% (average two-year fixed mortgage rate January 2019), the increase in monthly payments after a 3-month repayment holiday might increase future monthly payments by £14 pcm! In short, you are deferring the interest, but it still has to be paid

Better options might include asking to go to interest-only for a while whilst you restructure your budget or just make partial repayments for a while. Either way, the FCA (Financial Conduct Authority) have said that agreed mortgage repayment holidays should not damage your credit score in the future. This said, several factors are considered when one’s ‘credit score’ is being assessed.

With Bank of England Base interest rates currently at an historic all-time low of just 0.1% now might be an excellent time to consider remortgaging. In uncertain times, remortgaging on more favourable terms and perhaps fixing rates for the next few years might be a prudent option?

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