If you’re still struggling to pay your mortgage due to the coronavirus, it’s possible to get help.
Back on 17 March, banks agreed to offer help with mortgages for those struggling to make payments. The mortgage payment holiday was set at three months, offering homeowners a “holiday” where they weren’t required to make payments.
Once the offer was made available, about 1.8 million mortgages were granted the three-month extension. Now we’re nearing the end of the mortgage holiday, some who are still struggling with finances have worried about how they’d make payments. However, they will be able to take advantage of an extension of the three-month mortgage holiday.
The FCA (Financial Conduct Authority) has drafted a new initiative that calls for an extension of the application period for the initial mortgage holiday. This would extend the period to 31 October 2020, giving those who haven’t applied for the holiday time to request an extension of the payment holiday.
In addition, repossession of homes is banned until 31 October, too.
While the extension is still in the proposal phase, here is what the FCA is asking mortgage lenders to do:
- For those who haven’t had a mortgage payment holiday, they will have until 31 October 2020 to apply. And for those who are making repayments, but get into financial difficulties, these people will be able to request a payment holiday until 31 October.
- If people under the current payment holiday, which is now set to end, they can ask for another three months extension if they are still having trouble making ends meet. The FCA asks that lenders continue support of customers who already have had a payment holiday, but who still need assistance unless the mortgage holiday would create additional financial difficulties.
- Lenders are expected to contact their customers who are now on mortgage holiday and ask what they can repay. If those customers are still having trouble, then the FCA expects lenders to offer further assistance, which can include another three-month payment holiday.
- The FCA is asking that if customers can make full or partial payments, that they do so. Once the payment holiday is over, lends need to contact their customers and work with them to create a plan on how to repay the missed payments. Options can include spreading the cost of payments over the remaining mortgage or extending the mortgage term.
- The ban on repossession of homes will continue until 31 October 2020.
- Payment holidays/partial payment holidays will not be counted as missed payments on customers’ credit files; however, the FCA reminds customers that lenders don’t only rely on credit files when it comes to making decisions on the creditworthiness of a person.
According to the FCA, these are the minimum standards, which should not keep lending firms from doing everything necessary to help customers suffering financially from the coronavirus.
While buy-to-let mortgages are not specifically included in the proposal, the FCA hopes that these lenders will also offer extensions their landlord customers.
This is good news for anyone who is continuing to experience financial difficulties as a result of the coronavirus; however, the mortgage holiday extension could cause trouble later for customers. The reason is that mortgage shortfalls must be made up. This means that mortgage bills will be higher later when its time to resume payments again. And if a customer asks for the 2nd extension, this will increase the mortgage bill again at a later point.
The hope is that because mortgage rates are fairly low right now, the extension can be spread over 25 years. This could keep the increase easier on the wallet, but this remains to be seen.
Christopher Woolard, FCA Interim chief executive, said, “Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.
“Where consumers can afford to restart mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday will also continue to be able to apply until 31 October.”