Borrowers may be eligible for a mortgage break of up to six months
Homeowners struggling to pay their mortgage due to Coronavirus (COVID-19) can now extend their mortgage payment holiday for a further three months, or start making reduced payments, in proposals announced by Chancellor Rishi Sunak on 22 May.
The scheme to help those struggling to pay their mortgage due to the impact of COVID-19, has been extended to 31 October. This means that borrowers may be eligible for a mortgage break of up to six months. The extension also applies to a ban on repossessions of homes by lenders.
Unprecedented package of support for individuals
The availability of a three month mortgage holiday was first announced in March as part of an unprecedented package of support for individuals, businesses and the economy. Over 1.8 million mortgage payment holidays were taken up, and the first of these will be coming to an end in June.
To give people the certainty they need, they will be contacted by their lender to discuss a way forward. Where consumers can afford to re-start mortgage payments, it is in their best interest to do so. However, if people are still struggling and need help, a full extension of the mortgage holiday for a further three months will be available as one of the options open to them.
Opting to extend a mortgage payment holiday
The Financial Conduct Authority (FCA) has published new draft guidance for lenders which sets out the expectations for firms and the options available to their customers. The current lender ban on repossessions of homes will be continued to the same date.
Lenders will be expected to contact their customers whose mortgage holiday is coming to an end. Some may be able to resume their full monthly payments, others may be able to pay a proportion of their monthly payment, or temporarily switch to an interest only mortgage, and others will opt to extend their mortgage payment holiday.
Opportunity to extend the term of the mortgage
Borrowers that resume with their mortgage payments will be given options on how best to do so, such as the opportunity to extend the term of their mortgage in order to leave their monthly payments at around the same level as they were prior to their mortgage holiday. The borrower will still owe the outstanding debt and this may mean needing to extend the mortgage term if they want payments to remain at their pre-pandemic level.
Not all lenders will be offering all borrowers all of these options. Speak to your lender to find out which one you might be able to take. Normally a payment holiday is granted on a case-by-case basis with financial hardship and general situational factors taken into account. Double check with your lender that taking one now because of coronavirus won’t prohibit you from asking for one in the future.