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Early on the coronavirus pandemic, it became clear that many homeowners would begin to struggle with mortgage repayments. In mid-March, lenders agreed with the FCA to offer mortgage payment holidays of up to three months to affected people. Now, as the first of those are coming to an end, the FCA has announced that mortgage payment holiday extensions will be available for another three months.
From tomorrow (4 June), new measures will:
- Provide homeowners with options when their current mortgage payment holiday ends
- Ensure that homeowners can ask for a payment holiday, even if they haven’t had one yet
- Extend the existing ban on repossessions to 31 October.
If you already have a mortgage holiday that is coming to an end, the key detail you need to understand are the ‘options’ you’ll be provided with.
Mortgage payment holiday extensions available – but not automatic
When your payment holiday nears its end, you’ll be offered options that include:
- Starting to pay your mortgage again. Your lender will work with you to find a way to catch up on the payments you’ve missed.
- Making reduced payments. If you can afford to pay something towards your mortgage, your lender will work with you to agree reduced payments for up to three months.
- Taking another mortgage payment holiday. If you can’t afford to pay anything, you’ll get more support and will be considered for one of the new mortgage payment holiday extensions.
Of course, the more payments you miss, the more interest racks up. So it’s obviously wise to agree to pay what you can afford, even if you can’t cover the full mortgage payment.
Be aware of ‘threatening’ letters
If you have taken a mortgage payment holiday, be aware that the Consumer Credit Act still requires that you are sent a warning letter after two missed payments. Legally these letters have to include the following text in capital letters:
“IF YOU ARE NOT SURE WHAT TO DO, YOU SHOULD GET HELP AS SOON AS POSSIBLE. FOR EXAMPLE YOU SHOULD CONTACT A SOLICITOR, YOUR LOCAL TRADING STANDARDS DEPARTMENT OR YOUR NEAREST CITIZENS’ ADVICE BUREAU.”
Some lenders have been very good, with the Guardian pointing out that some lenders have advised people the letters will be sent, with others sending letters with ‘wrap-around’ text explaining that the letters can be ignored for the time being. The BBC, however, has focused on the negative impact the letters can have on people’s mental health. So if you do take a payment holiday, be aware you will be sent one of these letters.
Do mortgage payment holiday extension affect your credit rating?
If you do take a mortgage payment holiday, there should in theory be no negative impact on your credit file. However, it is possible that lenders will be looking for evidence of payment holidays when assessing you for future credit. There’s a useful article at MoneySavingExpert.com that explains how this might happen.
What about credit card payment holidays?
If you also have payment holidays on credit cards or loans, you will be keen to know whether these will also be extended. Currently there has been no announcement, but the FCA guidance for mortgage holidays says:
Consumer credit products are covered by separate guidance that will be updated in due course and may be different from the guidance for mortgage payment holidays.
To our ears, that sounds like some kind of additional help for consumer credit repayments will be announced soon. Let’s hope that this is so. Also remember, we have a useful round-up of help for your personal finances during the current situation.
About Ben Locker
Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.