The Financial Conduct Authority has published new draft guidance for lenders which will set out options available to their customers in the extended mortgage holiday period.
When the guidance comes into force, later this week, lenders will be expected to contact their customers whose existing mortgage holiday is coming to an end.
Some may be able to resume their full monthly payments, others may be able to pay a proportion of their monthly payment, or temporarily switch to an interest-only mortgage, and others will opt to extend their mortgage payment holiday.
Borrowers that resume with their mortgage payments will be given options on how best to do so, such as the opportunity to extend the term of their mortgage in order to leave their monthly payments at around the same level as they were prior to their mortgage holiday.
The FCA says it expects:
- 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 on 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 October 31 this year;
- keeping a roof over people’s head during a public health crisis – the current ban on repossessions of homes will be continued to October 31. This will ensure people are able to comply with the government’s policy to self-isolate if they need to;
- payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.
The availability of a three month mortgage holiday was first announced in March as part of a package of support for individuals, businesses and the economy.
Over 1.8m mortgage payment holidays were taken up in the original scheme, and the first of these will be coming to an end next month.