One in seven mortgages now subject to payment holiday
28 April 2020, 11:24
For the average mortgage-holder, the payment holiday amounts to £755 per month of suspended payments, UK Finance said.
One in every seven mortgages is now subject to a payment holiday, due to measures supporting people in financial difficulties due to coronavirus.
As of Friday April 24, lenders had granted more than 1.6 million mortgage payment holidays, trade association UK Finance said.
For the average mortgage-holder, the payment holiday amounts to £755 per month of suspended payments.
UK Finance also said firms are waiving a rule in order to help customers move over to a new mortgage deal with their lender.
Normally, customers who are coming to the end of a fixed-term deal would not qualify for a product transfer if they are currently on a mortgage payment holiday.
But UK Finance said that, given the current exceptional circumstances, lenders are waiving this rule to help borrowers affected by Covid-19.
Product transfers are for like-for-like mortgages and tend not to require borrowers to go through a new affordability assessment, meaning existing borrowers who have been furloughed will also be eligible.
Robin Fieth, chief executive of the Building Societies Association (BSA), said: “Lenders are working hard to help in a range of ways and it is right that this now includes the ability for those on a three-month payment holiday to be able to switch on to a new product with their existing lender at the end of a fixed-term product should the two events coincide.”
Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), said: “This agreement builds on the commitment made by lenders in July 2018 to contact customers who are coming to the end of a mortgage deal and discuss what alternative options might be available.
“It offers additional – and no doubt welcome – reassurance that customers will not be penalised if they have sought an approved payment holiday during this difficult period.”
Three-month mortgage payment holidays may be offered to borrowers who are up to date with their payments.
But interest will continue to accrue and borrowers will still owe the money when a payment holiday has been granted – so the overall mortgage debt will continue to build up and it will still need to be paid off.
Mortgage borrowers may want to consider making part-payments to reduce their debt even if they cannot currently afford to pay the full amount.
UK Finance said a payment holiday may not be the right choice for everyone, and customers should only apply if they need one.
People making applications for this support will need to self-certify that their income has been either directly or indirectly hit by the coronavirus pandemic.
It has also previously said that firms will make every effort to ensure that payment holidays do not negatively affect people’s credit ratings.
More than a third of all payment holiday approvals so far were in the early days of the lockdown, between March 25 and April 1.
UK Finance chief executive Stephen Jones said: “The industry has acted quickly to support home-owners through this crisis and has taken decisive steps to ensure that eligible customers on payment holidays due to Covid-19 can opt for the security of fixing their monthly mortgage payments going forward.
“There is a range of support available to mortgage-holders concerned about their finances. We would encourage any home-owners impacted by coronavirus to visit their lender’s website in the first instance to find out more information and how to apply.”
Many lenders are offering customers the option to apply for a mortgage payment holiday by filling in a form on their website, as phone lines remain extremely busy.
Lenders are also urging mortgage-holders not to cancel their direct debits before a payment holiday has been agreed, as this will be counted as a missed payment and could affect their credit file.