Borrowers on mortgage payment holiday will be offered product transfer
People on a repayment break would usually be denied a product transfer, pushing them onto a costly Standard Variable Rate (SVR) when their fixed term comes to an end.
But as a result of the extraordinary circumstances relating to the coronavirus outbreak, lenders have agreed that borrowers on mortgage payment holidays will be able to move onto a new deal during this time.
The trade body said borrowers will still have to meet eligibility criteria, but will typically not require a new affordability assessment for a like-for-like mortgage helping those who have been furloughed.
It comes as latest figures reveal more than 1.6 million borrowers have taken a mortgage payment holiday, with one in seven loans now on hold. Nearly 700,000 payment holidays have been granted in April.
For the average mortgage holder, a payment holiday amounts to £755 of suspended payments per month.
‘Security of fixing payments going forward’
Stephen Jones, UK Finance chief executive, said: “Lenders understand that many households are seeing their finances squeezed due to the coronavirus pandemic and we are working hard to help customers get through these tough times.
“The industry has acted quickly to support homeowners through this crisis and has taken decisive steps to ensure that eligible customers on payment holidays due to Covid-19 can opt for the security of fixing their monthly mortgage payments going forward.
“There is a range of support available to mortgage holders concerned about their finances. We would encourage any homeowners impacted by coronavirus to visit their lender’s website in the first instance to find out more information and how to apply.”
Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), added: “This agreement builds on the commitment made by lenders in July 2018 to contact customers who are coming to the end of a mortgage deal and discuss what alternative options might be available.
“It offers additional – and no doubt welcome – reassurance that customers will not be penalised if they have sought an approved payment holiday during this difficult period.”