Mortgage holiday support extended
Borrowers who are struggling to pay their mortgage due to the coronavirus will receive more mortgage holiday support under new proposals.
The Financial Conduct Authority (FCA) announced the proposals designed to extend the package of mortgage holiday support for borrowers.
Under the proposals, banks and building societies will need to give options to their customers who are coming to the end of a mortgage holiday.
These options will also apply to borrowers who are yet to request a mortgage holiday, given them until 31st October 2020 to apply.
For those borrowers who are still experiencing temporary payment difficulties because of the pandemic, lenders should offer the option of extending their mortgage holiday by three months.
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 31st October.
Assuming the FCA’s proposals are confirmed, they would expect customers who can afford to return to full repayment to do so in their best interests, at the end of a payment holiday.
Banks should contact their customers to ask if they can resume their mortgage payments and agree on a plan of action to make up for any missed payments.
Any borrowers who still need help will get this from their lender, with firms expected to engage with their customers and find out what they can repay.
For those borrowers who remain in temporary financial difficulty, banks should offer further support, including the option of extending the mortgage payment holiday by an additional three months.
Where customers have not yet had a payment holiday, but are experiencing financial difficulties, they will be able to request one until 31st October 2020.
Importantly, the current ban on repossessions of homes will continue until 31st October 2020.
Payment holidays and partial payment holidays offered under this guidance should not harm credit files.
However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.
The FCA points out that lenders can also offer more favourable forms of assistance to customers facing financial difficulties, including reducing or waiving interest.
Banks should consider signposting customers towards sources of debt advice.
Debt advice may be helpful for customers coming to the end of payment holidays. It may be particularly useful for consumers with pre-existing payment shortfalls or who are likely to be in longer-term financial difficulty.
When implementing this guidance, firms should be particularly aware of the needs of their vulnerable customers and consider how they engage with them.
For customers who aren’t able to use online services (such as digital channels), firms should make it easy for customers to access alternatives.
Final guidance is expected to be issued shortly after the consultation closes next Tuesday.
The FCA guidance only applies to mortgages, and not yet to consumer credit products. Further guidance around personal loans and other forms of consumer credit is expected shortly.
Commenting on the latest proposals, Vim Maru, Retail Director Lloyds Banking Group, said:
We have helped more than one million of our customers with repayment holidays, including over 400,000 for mortgages. We support the FCA and Government in providing guidance on this topic to ensure that customers are treated consistently.
We are already proactively contacting our customers who will be reaching the end of their repayment holidays to support them in restarting their payments. For those who may continue to be financially impacted, we will offer a range of support based on their current financial circumstances.