Mortgage Crisis on the Horizon as UK Mortgage Payment Holiday Comes to an End

Mortgage Crisis on the Horizon as UK Mortgage Payment Holiday Comes to an End

With the mortgage payment holiday about to end, and with it the temporary ban on evictions, a wave of mortgage defaults and repossessions could be on the horizon.

Nearly 2 million UK households have received a full or partial mortgage holiday since the scheme was introduced and with pay cuts and job losses occurring up and down the country many consumers could face significant difficulties making repayments.

With the payment holiday scheme coming to an end, the FCA (Financial Conduct Authority) advised lenders to offer “tailored support” to borrowers at risk of missing payments. The financial watchdog went on to warn of further difficulties in the coming months with the potential for many more homeowners to become affected by the economic fallout from the Covid-19 pandemic.

To support those who continue to suffer financial difficulties, along with those newly affected, the FCA has recommend mortgage lenders offer a range of tailored support options including the extension of the payment term, the possibility to restructure the mortgage, or temporarily reducing payments or accepting no payments.

Without a mandatory support and economic relief programme for those with mortgages, the worst affected could end up facing repossession as they become a financial burden for lenders.

To avoid this outcome, many homeowners will be looking to sell houses fast and either downsize or enter the rental sector. This could apply a slight downward pressure on house prices in the UK as a wave of homes are brought onto the market. However, with the general economic situation, it may be difficult for homeowners to sell their houses fast enough.

Whatever the precise outcome may be, it is clear that the coming months will present significant challenges to both mortgage lenders and borrowers. In recognition of this, the FCA has said it will continue to consider the option of extending the mortgage holiday scheme past its current end date (October 31st), but it does not plan on doing so at this time.

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