The FCA have issued new guidance on they expect mortgage lenders and administrators to treat customers fairly during this coronavirus (Covid-19) situation.
Payment holidays
A ‘payment holiday’ means you agree with your lender that you will not have to make mortgage payments for a set amount of time. Payment holidays are designed to help you when you may experience payment difficulties – in this case because of the coronavirus situation.
It is important to remember that you still owe the amounts that you don't pay as a result of the payment holiday. Interest will continue to be charged on the amount you owe.
This means that, at the end of the payment holiday, you will have to make up the missed payments. There will be various options for doing this, for example by increasing your monthly payments slightly, or by adding a short extension to your term. Your lender will be able to explain to you what options it offers.
Applying for a payment holiday
You should contact your mortgage lender if you are experiencing or reasonably expect to experience payment difficulties because of circumstances related to coronavirus.
What to do with direct debits
It is only a payment holiday if it has been agreed with your lender.
You should not cancel your direct debit without speaking to your lender first. Cancelling your direct debit is not a payment holiday and will be counted as a missed payment. This could show up in your credit file and may impact your ability to remortgage.
Interest on your mortgage during the payment holiday
You will still be charged interest during the payment holiday, unless your lender has told you otherwise.
When the payment holiday ends
At the end of the agreed payment holiday, you will continue to make payments. And you will need to agree with your lender a manageable way to make up the missed payments given your circumstances.
If you are still not able to make your full mortgage payments due to circumstances relating to coronavirus, then the lender may offer you a further payment holiday, or other arrangements, if these are appropriate to your circumstances.
Your credit file
The guidance makes clear to lenders that they should ensure that taking a payment holiday will not have a negative impact on your credit file.
Agreeing the payment holiday
We expect lenders to offer payment holidays to borrowers who are experiencing or reasonably expect to experience payment difficulties because of coronavirus, unless they consider another option is better suited and in your best interest. Many lenders have already committed to this.
Your lender may also offer other options if they are more appropriate for your circumstances, and where it is in your interest. You can discuss these with your lender.
You should not apply for a mortgage payment holiday if you are not experiencing or do not reasonably expect to experience payment difficulties.
If you are behind with your mortgage payments.
Lenders ar expected to offer payment holidays to borrowers who are experiencing or reasonably expect to experience payment difficulties because of circumstances related to the coronavirus, or another option better suited to your needs and in your best interest, whether or not you are already behind on your payments.
How long do I have to apply for a mortgage holiday?
You can apply for a payment holiday at any time before this guidance is reviewed in 3 months. The payment holiday will not start, however, until it has been agreed with your lender.
Contacting your lender at this time
Lenders have committed to responding as quickly as possible, but due to high levels of demand and staff having to work from home, service levels might be slower than usual.
You should speak to your lender in good time before the next payment is due.
Before calling:
- Ask yourself: Do I need to speak to my mortgage lender today?
- Consider: Can I do this through mobile online banking?
- Review: Is the answer already on my lender’s website?
Repossessions
Lenders are temporarily stopping repossession actions
During this current period of unprecedented uncertainty and upheaval, people should be at risk of losing their homes. Therefore lenders are expected to stop repossession action. This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by coronavirus. Many lenders have already committed to this.
For more information, contact Mortgage Required on 01628 507477 or see the FCA website.
Recent posts
We look at why mortgage rates increased following the Bank of England's choice to reduce the bank rate, and should you fix now?
UK 2024 Autumn Budget: Housing
17 days ago
On 30th October 2024 the Chancellor, Rachel Reeves delivered the Autumn budget which we had previously been warned would be “difficult”. Below we have summarised the main housing points.
Talking about money with kids
24 days ago
In an increasingly cashless society, money is an intangible concept for children to grasp. In the days of coins and notes, kids could see money as something physical you require to purchase goods and services.
In order to help teach your children about money, we have listed some tips below;
Labour Autumn Budget Predictions: Housing
18 Oct 2024
The UK’s chancellor, Rachel Reeves will deliver the Labour government’s autumn budget at the end of the month, we take a look at what could be announced in relation to housing.
Recent research from Halifax has revealed the most sought-after locations for first time buyers in Britain.
The data which was taken from the Halifax House Price Index looked at areas outside of London where those looking to purchase their first property were buying. Despite high property prices and increased rates, these first time buyer hotspots have remained popular.
How can I look after my mental health?
7 Oct 2024
Taking care of your mental health means looking after your emotional, psychological, and social wellbeing. There are several ways we can practice self-care that will help to improve our physical and mental health. This can help to reduce our risk of illness, manage stress, and boost our energy levels!
First Time Buyer to do List
4 Oct 2024
Buying your first home is very exciting but it can also be very daunting which is why we have set out a “to do list” to help you get started.
Bank of England Holds Base Rate at 5%
20 Sep 2024
With UK inflation remaining at 2.2% which is slightly above the Bank of England’s 2% target, the decision was made on Thursday 19th September to keep the base rate at 5%.
More information
Trusted by
