What next for borrowers on mortgage payment holidays?

The Financial Conduct Authority has unveiled proposals to ensure that lenders provide tailored support to mortgage borrowers who continue to face payment difficulties due to Coronavirus. 

During the initial phase of the pandemic, payment holidays provided mortgage borrowers with immediate and temporary support.  

Trade association UK Finance said that the banking and finance sector has been working hard to support people's financial wellbeing.  

Since the launch of payment-deferral schemes, lenders have granted 2million mortgage payment deferrals, 1.05million credit card payment deferrals and 707,000 personal loan payment deferrals, as well as applying over 27million overdraft buffers to primary current accounts.

Guidance

The FCA has now published additional draft guidance for mortgage firms. 

The current guidance provides support for those impacted by Coronavirus until the end of October, with consumers able to take a first or second three-month payment deferral.  

The FCA expects the current guidance to expire on October 31, but said it will keep this under review "depending on how the wider situation develops". 

The draft guidance proposes that lenders should consider a range of different short and long-term support options to reflect specific circumstances of their customers. This could include extending the repayment term or restructuring of the mortgage.  

Where consumers need further short-term support, the FCA said firms should offer arrangements for no or reduced payments for a specified period to give customers time to get back on track. 

Christopher Woolard, interim chief executive at the FCA, said: "It is important that consumers who can afford to resume mortgage payments should do so. However, we understand that borrowers facing payment difficulties because of the pandemic will continue to face uncertainty and may also experience temporary interruptions in income.  

"We are proposing that firms contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track.” 

Back to normal

UK Finance said that, of those whose mortgage payment deferral has come to an end, over 70% have resumed making full payments. 

It added: "However, the industry recognises that some borrowers may continue to need financial support during these unprecedented times. The FCA's updated draft guidance provides helpful clarity for those who continue to be financially impacted, or who are newly affected, by the Coronavirus pandemic.  

"It will always be better for a customer who can afford to make payments towards their mortgage to do so, but help is available if this is difficult for any reason."