Mortgage Holiday For Homeowners Affected by the Coronavirus
Updated Wednesday 18th March 10am
The Chancellor announced yesterday (17/3/2020) that he had agreed with UK banks that any homeowner struggling to meet their mortgage payments due to the impact of the Coronavirus will be able to apply for a 3 month mortgage holiday from their lender.
As of writing, there isn’t much in the way of detailed information from any of the lenders. We will be updating this page as and when more information becomes available but for now, this is what we know:
Stephen Jones, CEO of UK Finance – the collective voice for the banking and finance industry said yesterday:
“Mortgage lenders will support customers who are experiencing issues with their finances as a result of COVID-19 and the options include a payment holiday of up to three months.”
“Monthly mortgage payments tend to be the largest outgoing for the vast majority of households and lenders are keen to reassure homeowners that the industry is working hard to put measures in place to support them during these uncertain times.”
“Customers who are concerned about their current financial situation should get in touch with their lender at the earliest possible opportunity to discuss if this is a suitable option for them.”
So what does this mean in practical terms?
Q: What if I’m already in arrears?Stewart Pitt2020-03-18T15:28:20+00:00
A: You should contact your landlord or managing agent if you have problems paying your rent. If you are a landlord and your tenants are unable to pay their rent you should contact your lender as soon as possible to discuss the options that may be open to you.
Q: How will this affect my credit score?Stewart Pitt2020-03-18T15:26:48+00:00
A: Under normal circumstances, taking a payment holiday can result in your lender reporting the missed payments as arrears which would have a seriously adverse effect on your credit score and make it difficult to obtain credit in the future.
However, given the unprecedented nature of the current situation, lenders have confirmed that “help offered under these circumstances will not result in an adverse impact on the customer’s credit score.”
Q: How do ‘payment holidays’ work?Stewart Pitt2020-03-18T15:21:10+00:00
A: The mortgage repayment is deferred for a period. The monthly payment changes to zero, and interest accrues for the period. This may be particularly appropriate where there is a temporary shortfall of income.
However, this is not a solution where, because of a permanent reduction in income, a borrower is unable to afford anywhere near the full mortgage repayments and there is little prospect of an improvement in the situation in the foreseeable future.
Where repayments are deferred for a time, the borrower will need to make up these repayments in the future, which could be over the remaining term.
Q: How do I apply for a payment holiday?Stewart Pitt2020-03-18T15:21:34+00:00
A: You will need to contact your lender to request a payment holiday.
Normally, your lender would need to fully assess your finances and consider what options for assistance are most suitable.
However, lenders recognise that the challenges faced due to the Coronavirus are unprecedented and borrowers need a quick solution.
Therefore, customers who are up to date with their mortgage payments will be able to self-certify that they need help which makes the whole process quicker and more straightforward.
Should the customer wish, the lender could conduct a full assessment of their finances. It’s therefore important that customers who believe they may be impacted by COVID 19, either directly or indirectly, contact their lender at the earliest possible opportunity to discuss if the payment holiday is a suitable option for them.
Q: Are all customers eligible for a payment holiday?Stewart Pitt2020-03-18T15:19:54+00:00
A: In short, yes, but only if you are up to date with your mortgage payments.
Anyone who finds themselves in financial difficulty due to the Coronavirus can apply for a 3 month mortgage holiday provided their payments are up to date. However, a mortgage holiday isn’t always the best option for everyone.
A flexible approach will enable all types of lenders to offer the right support for customers. Many lenders will want to speak to customers to find out how they can tailor the best option for them.
Firms will help customers the best way for the individual, but an automatic payment holiday may not always be the most suitable approach and may not be required by all customers.
Firms will be speaking to credit reference agencies to ensure consistent treatment of those customers to whom a repayment holiday is made available.