The Financial Conduct Authority’s interim chief executive, Christopher Woolard, said it believed half of those people who had taken an initial break were now able to pay.

As such, Woolard agreed that extending lockdown would need the mortgage payment holidays to be considered again.

“Clearly, if there are further restrictions that need to be placed for health reasons; if the situation becomes more complicated in some way, then we’ll have to think about how we adjust to those circumstances,” he said during the regulator’s Inside FCA podcast.

“But we’re very much trying to provide a smooth way of getting as many people back to what feels almost like normality from the point of view of their finances, if we possibly can.”

Last week the FCA confirmed it would be extending the mortgage payment holiday availability for another three months, but lenders are being given more scope to see if borrowers can afford to make some repayments when making a second application.

Woolard emphasised that while lenders were being asked to bare the burden in the short-term, borrowers would also feel it in the longer term through extended mortgages and rolled-up interest.

“So it’s everyone’s best interest to actually get back towards payment wherever that is possible or even partial payment, but we have to recognise that there’s an ongoing situation here,” he said.

Half can begin payments

Overall, he noted that around 1.7 million people had applied for a mortgage holiday, as many as a fifth of borrowers at some banks and building societies.

“About half of that group are people who perhaps thought they were going to lose a job or have some other kind of impact, and in fact they’re in a position where they could still afford to pay now that that ninety day period is coming to an end,” Woolard said.

“At the same time, about 40% of that group are still impacted by coronavirus, so for example you might be a hairdresser, you can’t get back into the salon or the barber shop because there are closures in place but we also know that as soon as those closures begin to lift and ease, there will be a queue of people probably all with quite dodgy lockdown haircuts queuing up to be served.

“So, for someone like that, there’s still the need for temporary help to continue beyond the 90 days and what we’ve proposed is that should continue to be in place and the banks and building societies and other lenders should offer that and a range of options for people.”

Continued forbearance necessary

However, Woolard acknowledged there were a number of people who were being more severely impacted financially and would need other types of forbearance.

“There’s a small group for whom unfortunately perhaps their finances weren’t in the best of health even before the crisis began and coronavirus has been the final straw,” he said.

“Obviously those people do need to have formal structured debt advice and to have payment plans put in place for them, but what we’re trying to achieve here is a situation with mortgages where if you need help, help is available from your bank or building society and it’s tailored to you to allow you to get through the worst effects of the immediate shock from coronavirus.”