6 Month Mortgage Holiday Stays Until Summer 2021

Proposals to enhance support for mortgage borrowers impacted by coronavirus made on the 2^nd November 2020 by the Financial Conduct Authority (FCA) have now been confirmed with guidance issued by the FCA to mortgage lenders.

Guidance to lenders setting out enhanced support for mortgage borrowers experiencing payment difficulties as a result of Covid-19 will be fully in force and made available from 20^th November 2020.  However, the FCA is encouraging firms that are able to start providing this enhanced support straight away.

Borrowers should keep up repayments on their mortgage if they can afford to do so and the FCA is asking people only to seek support if absolutely necessary.

Details on which groups of borrowers will and will not be able to access payment deferrals has also been provided by the FCA:

• Consumers that have not yet had any payment deferral will be eligible for payment deferrals of 6 months in total.
• Consumers currently on a payment deferral will be eligible to top up to 6 months in total.
• Consumers who have previously had payment deferrals of less than 6 months will be able to top up, as long as total deferrals don’t exceed 6 months.  This includes those who are behind on payments and those receiving tailored support.
• Borrowers that have already taken a 6-month payment deferral will not be eligible for a further payment deferral.  Tailored support appropriate to their circumstances will be provided by firms and this may include the option to defer further payments.

The FCA has confirmed tailored support will continue to be offered to borrowers by firms.

FCA’s interim Executive Director of Strategy and Competition Sheldon Mills said: “Today we have confirmed further support for borrowers financially struggling due to coronavirus, this support ensures payment deferrals offered is as flexible and accessible as possible, we do ask that payment deferrals are only taken if absolutely necessary”.

The FCA has also confirmed that no one should have their home repossessed without their agreement until after 31^st January 2021.

Consumers have until 31^st March 2021 to apply for an initial or further payment deferral.  After that date, borrowers can extend existing deferrals to 31^st July 2021, provided these extensions cover consecutive payments and subject to the maximum 6 months allowed.   Borrowers that have not yet taken a payment deferral and think they will need the full 6 months should apply as soon as possible in time for their February 2021 payment.

Borrowers that defer payments under these proposals will not be reported as missed payments on their credit file.  

Although tailored support may be reported on their credit file and lenders should inform borrowers if this is the case.  Payment deferrals offered as tailored support could also be recorded on borrower’s credit file.

Separate guidance for borrowers issued in October by the FCA that have interest only or part and part mortgages whose capital repayment plans were affected by coronavirus.  Meaning that borrowers where their mortgages matured from 20^th March 2020, can delay the repayment of the capital on their mortgage until 31^st October 2021.

In addition, borrowers accessing payment deferrals before maturity can also access payment deferrals after maturity without affecting their ability to delay the capital repayment.

The FCA will continue to keep support available to consumers under review.

Comment

This is a big strain, not just on lenders but also borrowers who may have lost their jobs and find it on impossible to secure new employment during lockdown.