Homeowners in financial difficulty because of the coronavirus outbreak will now be able to defer their mortgage payments
Homeowners hit by the coronavirus will get a three-month mortgage holiday under new plans unveiled by the Government.
Chancellor Rishi Sunak has introduced a series of emergency measures to help households affected by the coronavirus on top of the promises made in the Budget last week.
Those experiencing financial difficulty because of the coronavirus - including the self-employed – will get a three-month mortgage payment holiday if they need it.
The announcement was made as part of a package of financial measures to help shore up the economy during the coronavirus outbreak.
Sunak says: “Following discussions with industry today, I can announce that for those in difficulty due to coronavirus, mortgage lenders will offer at least a three month mortgage holiday – so that people will not have to pay a penny towards their mortgage while they get back on their feet.”
Banks including Royal Bank of Scotland, NatWest, First Direct and Lloyds Bank, have already introduced measures to help borrowers affected by the outbreak.
People who work in the gig economy or are self-employed have been hugely affected by the coronavirus, with many of them seeing their incomes fall as work had dried up.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says the three-month holiday is welcome news for those have been worried about their jobs and how they will pay the mortgage.
He says: “There is so much uncertainty that knowing the mortgage, which is most people’s biggest outgoing, will be paid, will remove a significant burden.”
What is a mortgage holiday?
A mortgage holiday is an agreement between you and your lender that temporarily allows you to pause or reduce payments on your mortgage.
The mortgage repayment is deferred for a period, during which the monthly payment changes to zero, and interest accrues for the period.
How do you apply for a mortgage holiday?
Lenders are offering customers who are up-to-date with their mortgage payments and impacted by the coronavirus the ability to self-certify.
Under usual circumstances, the lender would have to assess the customer’s finances, but this is being waived.
Customers who have been impacted by the coronavirus and are concerned about their financial situation should contact their lender as soon as possible.
What does it mean for your credit score?
Lenders will speak to credit reference agencies to make sure mortgage holidays do not have an adverse impact on the customer’s credit score.
What does it mean for your mortgage?
While the homeowner is not paying their mortgage, they are still accruing interest which will have to be paid at a later date.
This means that when your payment holiday comes to an end your outstanding mortgage payments and balance will be higher.