Mortgage payment holidays could be extended
Chancellor Rishi Sunak is believed to be looking at ways to extend the mortgage relief scheme beyond June.
Several newspapers have reported that Sunak is in discussion with the banking sector about ways to prolong the scheme which gives mortgage borrowers the right to request a three-month break from paying their mortgage.
Mortgage payment holidays mean borrowers can stop their monthly payments without their credit rating being hit. But it’s not free money – their debt continues to accrue interest during the break and monthly payments will be higher when they resume.
More than 1.6 million mortgage customers have taken advantage of the scheme since lockdown began in mid-March. UK Finance estimates the payment holiday saves the average borrower £755 a month.
As it stands at the moment, the respite from payments will end for the first applicants in June.
Any extension to the mortgage scheme may be on less generous terms – and it’s not yet clear whether it would be Government-funded.
When Sunak extended the furlough scheme earlier this month, he said businesses would have to meet part of its cost themselves after the end of July.
Salman Haqqi, personal finance expert at money.co.uk, says: “The government’s initial launch of mortgage holidays brought welcome relief for homeowners who had their income affected by the Covid-19 crisis.
“The scheme, where payment could be deferred with zero negative impact to credit ratings, resulted in up to one in nine homeowners making use of the initiative. Though a formal announcement is yet to be made, many businesses are still closed and the full extent of job losses is still becoming clear, so any extension to the scheme will be welcomed.
“Should homeowners wish to look into a payment holiday on their mortgage, it’s important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid. This means that your monthly payments will likely go up slightly after the payment holiday ends.
“While the option to take a payment holiday on mortgages will have been a lifeline for many, if you are still able to make your payments in full, you should continue to do so”.