Lenders may grant a payment break then deny future credit
More than 1.2 million homeowners have taken out mortgage payment holidays, but experts warn these can harm your ability to get further loans.
Mortgage holidays are breaks of up to three months from making homeloan repayments.
These holidays have been offered by lenders to help people with stretched finances due to coronavirus. The unpaid sum and interest has to be paid back, likely at the end of the mortgage term or spread over the remaining payments.
More than 1.2 million properties – or one in nine homeowners with mortgages – have been granted these suspended payments, according to the banking trade body UK Finance.
The average mortgage holiday is for £260 per month, and lenders now grant around 61,000 of these a day.
Will mortgage holidays mean I cannot get more credit?
Taking a mortgage holiday could affect your ability to get other loans if you need them.
Chris Sykes, of mortgage broker Private Finance, says those taking up the payment breaks will find it harder to remortgage or buy a separate property with a homeloan.
Sykes says: “By requesting a payment holiday, essentially, you are announcing to your lender, and, potentially, other lenders who might see your bank statements in the future, that you are in financial difficulty.
“One lender has even told us, if a borrower has requested a payment holiday on an existing loan, any new cases will automatically be declined. Be warned, they won’t be alone!”
Sykes says the issue could last for up to six months.
Will they affect my credit score?
Mortgage holidays might affect your ability to get credit but will not affect your credit score. This is because the three largest credit checking firms have agreed an 'emergency payment freeze'.
This means your score will not be affected during any payment holiday agreed with your bank or lender.
If I cannot make mortgage payments do I need to apply for a holiday?
If you are struggling you should contact your mortgage lender or broker to discuss your options. For example, they might agree to let you lower your monthly payments rather than pause them entirely.
This would not mean any extra interest would be added, but might mean your future monthly repayments rise or your term is extended.
Stephen Jones, chief executive of UK Finance, says: “Lenders have a number of options available to help, and payment holidays aren’t always the right solution for everyone.
"We would therefore encourage any mortgage customers concerned about their financial situation to check with their lender so they can find out more information on the support available and how to apply.”
They didn't and don't warn…
They didn't and don't warn people about that though. Not surprising give with one hand take with the other