Mortgage Payment Holidays
06 May 2020
Mortgage news blog
Mortgage holidays and current market
We’ve been asked for guidance on how to pay mortgages during the current situation, and so we wanted to provide an update to our clients.
I’m worried that I can’t pay my mortgage
The government has made it clear that 3 month payment holidays should be offered if a homeowner is struggling with payments because of coronavirus. Please talk to your mortgage lender rather than cancel a direct debit though. This holiday needs to be approved and cancelling the direct debit could put you into arrears, which would impact your credit score.
How do I request a mortgage holiday?
If you fancy spending 5 plus hours on hold, then call your lender. Otherwise, go onto their website and it should clearly direct you to an online section to submit a holiday request.
Do I have to pay it back?
Yes, but this will depend on the lender. Most lenders seem to be adding the debt onto the mortgage, which means it will increase your monthly payments for the rest of the term, or extending the term of the mortgage so that the monthly payment remains the same.
Are there any other options?
Some lenders may take a pragmatic view on switching to interest only, deferring payments or extending the mortgage term. They would have no obligation to do so, but these may be alternative options. If your mortgage is due for renewal, speak to your independent mortgage adviser for their advice.
Will I be at risk of repossession?
The Financial Conduct Authority has instructed banks and building societies to not repossess homes during this crisis, or charge fees for payment holidays.
I’m a landlord, am I covered?
Yes. The government advice includes landlords whose tenants can’t pay their rent due to coronavirus. Also, check your rent protection insurance as this may pay out in that instance.
Are lenders cutting rates?
The Bank of England has cut base rates, but most lenders aren’t being quick to adapt any fixed rate packages. This is also uncertain and unknown times for them, so they are looking at the impact and also dealing with a lot of increased activity by worried customers.
Have lenders stopped offering new mortgages?
A lot of lenders are removing their high loan to value mortgages (where the customer has a small percentage of the house price as a deposit). As they have been inundated with activity on mortgage holidays, they have had to move staff into different sectors and are, naturally, cherry picking the safest applications as being the ones to work on right now. So most have removed any loan to value above 75% and some more aggressively still. This will likely remain the case whilst we are in lockdown.
Paul Davies, Director
About Mortgages Ltd