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Struggling mortgage borrowers allowed maximum six month payment holiday

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Written by: Owain Thomas
17/11/2020
Borrowers will be limited to a total six months of payment holidays under the regulator’s updated guidance with those who have already taken this support not being able to extend further.

The Financial Conduct Authority (FCA) has confirmed the extension of mortgage payment holidays to accommodate further impacts of the coronavirus crisis.

Borrowers who have not yet had a payment deferral will be eligible for payment deferrals of six months in total and will need to apply by the end of February to take full advantage of the forbearance.

Those who currently have a payment deferral will be eligible to top up to six months in total as will those who have previously had payment deferrals of less than six months. This includes those borrowers receiving tailored support and those who are behind on payments.

The guidance noted that borrowers will have until 31 March 2021 to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to 31 July 2021, provided these extensions cover consecutive payments.

Firms will provide tailored support appropriate to borrowers’ circumstances and this may include the option to defer further payments, but it will not be under the rules of the FCA guidance.

“Payment deferrals under these proposals would not be reported as missed payments on a borrower’s credit file,” the FCA said.

“This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.”

Since the start of the pandemic, 2.6 million mortgage payment deferrals have been granted of which 140,000 are currently still in place, according to UK Finance.

Repossessions and interest-only

The FCA has also confirmed that no one should have their home repossessed without their agreement until after 31 January 2021.

And for interest-only and part-and-part borrowers, the regulator has extended its delay of capital repayments to those wishing to do so after maturity as well as before maturity.

This means that borrowers whose mortgages matured from 20 March 2020 can delay the repayment of the capital on their mortgage until 31 October 2021.

This does not include bridging or unregulated buy-to-let mortgages however.

Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “Today we have confirmed further support for borrowers struggling financially as a result of coronavirus.

“The announcement we have made today, ensures that the support offered through payment deferrals is as flexible and accessible as possible.

“This means borrowers will again be able to access payment deferrals up to a maximum of six months. However, if you are able to keep paying it will be in your best long-term interest to do so. Payment deferrals should only be taken when absolutely necessary.”

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