Another Mortgage Holiday On Offer If Required
The Financial Conduct Authority (the FCA) is set to offer support for mortgage borrowers who have been affected, or who might be impacted, by the second lockdown.
The regulator has announced it is set to extend payment deferrals by up to six months. For homeowners who currently have a mortgage holiday in place, a further three months of payment deferral has been proposed.
For homeowners who previously had a payment deferral but who have since resumed paying, the regulator has proposed an additional three month if required.
The FCA has also proposed an extension of property repossessions until after January 2021.
Fresh support for homeowners
Sheldon Mills is the interim executive director of strategy and competition at the FCA, and he said the FCA was liaising with lenders to ensure struggling borrowers could find the support they need. Mr Mills said; “Tailored support will still be offered and remains the most appropriate option for many borrowers, but we are proposing to extend payment deferrals for additional support. It is in borrowers’ own long-term interest only to take a payment deferral when absolutely necessary. Those that are able to keep paying, should do so. This allows support to be targeted to those most in need.”
Mr Mills has also advised borrowers to wait for their lender to contact them with new details and information, as opposed to contacting them.
Not all borrowers will benefit
The FCA has stated some borrowers will not be eligible for a payment deferral. Any borrower who has already claimed two deferrals in a six-month period would not be eligible for another. These people are advised to seek tailored support.
UK Finance figures suggest that as of October 9th, 162,000 mortgage customers were utilising a payment deferral. This is down from the peak of June 2020, which saw 1.8 million mortgage customers utilising this support.
Implications on credit scores
As per the proposals made by the FCA, borrowers will be able to request a payment deferral until the 31st of January 2021.
Under these proposals, any payment deferral will not be recorded as a missed payment on the borrower’s credit file. However, it should be noted this deferral might still be considered when a credit application is made.
Lenders consider a wide range of factors and information when deciding on what loans to offer. Additional and bespoke support might be listed on the credit file of someone in this situation, and lenders should notify borrowers when this is the case.
Robin Fieth is the Chief Executive of the Building Societies Association, and he said: “We recognise that the ongoing economic issues being caused by the pandemic are generating significant challenges for some households.”
While there are new challenges to overcome in the housing market, people shouldn’t consider arranging a mortgage to be an impossible task. However, it is vital people accept help and assistance from professionals in the field. If you are keen to arrange a mortgage, speak to a mortgage broker or experienced adviser and make sure you are fully equipped to make an informed decision.