Though, banks won’t be under any obligation to offer mortgage payment holidays to borrowers who need short-term support
Mortgage lenders will continue to offer mortgage payment holidays to some financially vulnerable customers after the government scheme ends, the Financial Conduct Authority has confirmed.
While the scheme officially ends at the end of next month, the FCA said that banks and building societies can continue to offer payment holidays for borrowers who need short-term support.
From November banks won’t be under any obligation to do this however, and the FCA has now confirmed that taking a payment holiday will affect a borrower’s credit report once the scheme ends.
The FCA said it will be ‘monitoring firms to ensure borrowers are treated fairly’ once the scheme ends in October.
Christopher Woolard, interim chief executive at the FCA, said: Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. Consumers in these situations will benefit from firms providing them with tailored support.
However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need, he said.
Eric Leenders, managing director of personal finance at banking trade body UK Finance, said: It is essential that customers go online or contact their lender to consider the best solution for them.
Firms will be communicating with customers whose mortgage payment deferral is coming to an end to discuss the options available. Those who can afford to resume payments should do so, as it will always be in their best interests in the long run, Leenders said.
Banks will rake in hundreds of millions of pounds in extra interest off the back of the payment holidays already granted, especially from those borrowers who opted for a six month rather than a three month holiday.
Taking a mortgage holiday could also severely hamper your ability to refinance in future.
While doing so before 31 October shouldn’t affect your credit score, industry insiders claim that some lenders are already starting to automatically decline applications for those who have taken a payment holiday.
Zane Groves of financial adviser firm Light Blue said: If you don’t need a mortgage break, don’t take one. It may be used against you in a future mortgage application, although this is yet to be proven on a large scale.