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 1.8 million mortgage payment holidays were taken up, and the first of these will be coming to an end in June. So to give people the certainty they need, they will be contacted by their lender to discuss a way forward. Where consumers can afford to re-start mortgage payments, it is in their best interest to do so. However, if people are still struggling and need help, a full extension of the mortgage holiday for a further three months will be available as one of the options open to them.
The Financial Conduct Authority (FCA) has published new draft guidance for lenders which will set out the expectations for firms and the options available to their customers. This includes extending the application period for a mortgage holiday until 31 October so customers that have not yet had a payment holiday and are experiencing financial difficulty will be able to request one. The current ban on repossessions of homes will be continued to the same date.
The Economic Secretary to the Treasury, John Glen said:
We’re doing everything we can to help people with their finances at this difficult time, and that includes making sure people get the support they need with their mortgages. That’s why we’re working with the banks and lenders to extend payment holidays if people need them.
Everyone’s circumstances will be different, so when homeowners can pay some or all of their mortgage, they should work with their lender on a plan; but if they are still struggling, I want them to know that help is there.
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 mortgage payment holiday, will also continue to be able to apply until 31 October.
When the guidance comes into force, following a short consultation, lenders will be expected to contact their customers whose 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.
Responding to the FCA proposals to extend the period of eligibility for mortgage holidays and ban on repossession of homes, Dame Gillian Guy, Chief Executive of Citizens Advice says:
“These proposals are an important recognition that many households are struggling to pay their bills during this pandemic. They will provide vital security to those whose incomes have been hit by the economic consequences of coronavirus.
“It’s crucial that as protections for home-owners are extended, private renters aren’t left behind. Our research indicates that millions of renters are finding it hard to pay their rent during this crisis, and there is now just one month to go until the current protections against eviction come to an end.
“The government pledged that no renter would be forced out of their home because of coronavirus. It’s time for them to stand by that promise.”
The charity is calling for additional protections for renters vulnerable to eviction because of the economic consequences of coronavirus. These include:
Accelerating the process to end section 21 ‘no-fault’ evictions
Putting in place temporary changes allowing the courts more discretion for tenants in arrears because of coronavirus
When these measures are in place, implementing a ‘pre-action protocol’ of steps that landlords must follow before they can bring possession proceedings.
A report out today (22 May 2020) from the Housing, Communities and Local Government Select Committee has endorsed these recommendations. It’s calling for the abolition of section 21 evictions and greater discretion for judges to prevent possession action where arrears have built up owing to Covid-19.