One Sixth Of Mortgage Holders Took Mortgage Holiday


It is believed, according to a report made by the BBC, that one-sixth of homeowners have taken out a mortgage payment holiday. This would equate to two million people in the United Kingdom, and it is important people realise the impact of doing so.

It has always been stated that the mortgage payment holiday wasn’t free money; and that it would need to be repaid at some time. Also, interest would apply, increasing the cost of the mortgage. However, there are now growing concerns that there could be a longer-term impact of mortgage payment holidays.

Lisa Orme is the managing director of Keys Mortgages and she has advised mortgage holders only to take a mortgage payment holiday as a last resort. Lisa said, “We know, anecdotally, that people have used them to pay off credit cards, pay for holidays, pay for cars. I’ve been saying to people, despite all these promises about how it won’t affect your credit file, I absolutely guarantee it will come back to bite you.”

Sarah Coles, personal finance analyst with Hargreaves Lansdown, also spoke on this matter, saying, “Banks will look at your payment history. And if you’ve got a three-month gap around this period, they are going to know that has clearly come from a mortgage holiday. If you’ve got a six-month gap, they are going to know you’ve had to extend it. And that will give them a really clear indication that you were having some financial issues at the time. So it will then make it harder to borrow.”

There has also been clarification on this matter from the FCA who released this statement in May, “Lenders may use sources other than credit files, such as bank account information, to take account of other factors in their lending decisions. These factors could include changes to income and expenditure.”

Lenders are contacting customers with revised payment details

With many households who arranged a mortgage payment holiday when it was first offered now at the end of the three-month period, lenders are contacting customers to outline details of the new payment.

Virgin Money Group states that there will be no impact of a payment holiday on any lending decision they make in the future, but this is considered to be unusual in the industry right now.

There have been significant numbers of people taking mortgage holiday payments

Lloyds Banking Group, which includes the Halifax, state they have approved 450,000 mortgage payment holidays for customers. The Remote Mortgage Director of Halifax, Tom Martin, has spoken about how a mortgage holiday might impact on a person’s ability to borrow in the future.
Tom said, “We base our decisions on a full understanding of a customer’s up-to-date circumstances. We do take into consideration your latest financial position, but we recognise as well that these are unprecedented times and we will consider individual circumstances as part of that process.”

NatWest have also released a statement on this matter, saying, “We will take customers’ circumstances into consideration when considering any borrowing requests. If a customer’s income is currently impacted by COVID and they are unable to afford their mortgage, we would consider this.”

A Treasury spokesperson said, “The Financial Conduct Authority has been clear that payment holidays should not have a long-term impact on people’s credit rating.”

Anyone who is considering arranging a mortgage payment holiday, but who hasn’t done so yet, still has time to arrange this. The deadline to apply for a three-month mortgage payment holiday is 31st October 2020, and is available for people whose finances have been negatively affected by the COVID-19 pandemic. The FCA has banned all property repossessions until the end of October 2020.

If you are looking for up-to-date and informed guidance on the mortgage market right now, it is best to speak with an experienced professional.

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