Last week, the Financial Conduct Authority (FCA) announced that they would be extending the deadline for mortgage payment holiday applications until 31st March next year. This means that homeowners whose finances have been affected by COVID-19 can apply for mortgage payment holidays of up to six months, despite original plans to end this financial support on 31st October.
What are “payment holidays”?
In March, the Financial Conduct Authority (FCA) announced new measures for lenders that provided tailored support to mortgage borrowers who faced payment difficulties due to the COVID-19 crisis. Payment holidays enable homeowners to defer the payments on their mortgage if they have been negatively financially impacted by COVID-19. As the current scheme is approaching its end, the FCA has announced an extension which will enable the continued support of struggling homeowners.
What does the extension entail?
The extension provides an additional five months for homeowners who are struggling to make mortgage payments to apply to this scheme and receive relief on their payments. It details that:
- Those who have not yet had a payment deferral will be eligible for payment deferrals of 6 months in total.
- Those who currently have a payment deferral will be eligible to top up to 6 months in total.
- Those who have previously had payment deferrals of less than 6 months will be able to top up, as long as total deferrals don’t exceed 6 months (this includes those receiving tailored support and those who are behind on payments).
- Borrowers who have already had 6 months of payment deferrals will not be eligible for a further payment deferral. Firms will provide tailored support appropriate to their circumstances. This may include the option to defer further payments.
The FCA has also confirmed that no one should have their home repossessed without their agreement until after 31 January 2021.
Will this impact my credit score?
Your first six months of payment holidays WON’T be reported as missed payments on your credit file. Usually if you miss a payment, the lender reports that to credit reference agencies. If you then apply for credit, other lenders will be able to see the missed payment. Yet, when you agree to a payment holiday with your lender, it’s reported as if the payment has been made.
But, it’s worth knowing that even if it’s not on your credit file, lenders can still find out about the payment holiday in other ways – for example, they can see your mortgage balance isn’t going down – and can use that information to help their decision when you next apply for credit.
Consumers will have until 31 March 2021 to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to 31 July 2021, provided these extensions cover consecutive payments, and are subject to the maximum 6 months allowed. Borrowers who have not yet taken a deferral, and who think they need the full 6 months should apply in good time before their February 2021 payment is due.
For more information or help with your finances, please contact us via our website.