Payment holidays to be extended by three months
The regulator has proposed further support for mortgage borrowers who are struggling to meet their monthly repayments because of Coronavirus.
The Financial Conduct Authority (FCA) wants lenders to continue to support customers beyond the initial three months.
Borrowers who haven’t yet asked for a payment holiday should be able to do so until 31 October 2020.
For those who are still experiencing temporary payment difficulties due to coronavirus, lenders should continue to offer support, which could include extending a payment holiday by a further three months.
What are the proposals?
Customers who can afford to return to full repayment should do so in their best interests – at the end of a payment holiday, firms should contact their customers to find out if they can resume payments and if so, agree a plan on how the missed payments will be repaid.
Anyone who continues to need help gets help – lenders should continue to support customers who have already had a payment holiday where they need further help. Firms are expected to engage with their customers and find out what they can re-pay and, for those who remain in temporary financial difficulty, offer further support. As part of this firms should consider a further three-month payment holiday.
Extending the time the scheme is available to people who may be impacted at a later date – customers that have not yet had a payment holiday and experiencing financial difficulty will be able to request one until 31 October 2020.
Keeping a roof over people’s head during a public health crisis – the current ban on repossessions of homes will be continued to 31 October 2020. This will ensure people are able to comply with the government’s policy to self-isolate if they need to.
Impact on credit record
The guidance also notes that payment holidays and partial payment holidays should not have a negative impact on credit files. However, the regulator warns borrowers that credit files aren’t the only source of information which lenders can use to assess creditworthiness.
This means a payment holiday could still impact your eligibility for a future mortgage.
Lenders have also been asked to signpost customers towards sources of debt advice and be particularly aware of the needs of their vulnerable customers and consider how they engage with them.
Christopher Woolard, interim chief executive at the FCA, said: “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. People who are struggling and have not had a payment holiday, will continue to be able to apply until 31 October.”
The proposals are under consultation until 26th May and the regulator expects to finalise the guidance shortly afterwards.