Homeowners struggling to pay their mortgage can put off repayments until October
Homeowners having difficulty paying their mortgage due to the coronavirus outbreak can extend their payment holiday for a further three months, until October.
In March, chancellor Rishi Sunak announced a three-month mortgage payment holiday for homeowners in financial difficulty because of the pandemic.
More than 1.8 million mortgage payment holidays were taken up, and the first of these will be coming to an end in June.
But the Government today says it is extending the mortgage holiday application period until 31 October for homeowners who have not yet taken one.
The current ban on repossessions of homes will also continue until 31 October.
Christopher Woolard, interim chief executive at the Financial Conduct Authority (FCA), says: “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 re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available."
What do the changes mean for you?
Lenders will be contacting customers whose mortgage holiday is coming to an end to discuss next steps.
The Government says homeowners who have taken a mortgage holiday will have to start making repayments if they can.
Other options may include making a proportion of their monthly payment, or temporarily switching to an interest-only mortgage.
Homeowners can also extend the term of their mortgage in order to bring their monthly repayments down.
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?
The FCA says that taking out a mortgage holiday should not have an adverse impact on a customer’s credit score.
However, lenders may take this into account when you apply for loans in the future.
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 along with the missed homeloan instalments.
This means that when your payment holiday comes to an end your outstanding mortgage payments and balance will be higher.
Myron Jobson, personal finance campaigner at Interactive Investor (Moneywise’s parent company), says: “Payment holidays only offer a temporary reprieve and sooner or later mortgage holders will have to pay what they owe.
"It is important to flag that while mortgage payment holidays should not have a negative impact on credit files, lenders may still take them into account to assess creditworthiness. So there are no easy options, but it does allow some reprieve, and more time for people to plan their financial affairs.”