finance

Mortgage holidays and home repossessions ban extended until end of October


HOMEOWNERS now have until the end of October to apply for a mortgage payment holiday if they’re struggling due to the coronavirus crisis.

The Financial Conduct Authority has also extended a ban on home repossessions for another four months, so owners can self-isolate if they’re ill, in accordance with Government policy, without fear of losing their property.

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Homeowners have until the end of October to apply for a mortgage payment break if they're struggling due to coronavirus

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Homeowners have until the end of October to apply for a mortgage payment break if they’re struggling due to coronavirus Credit: Getty – Contributor

Households whose finances have been hit hard by the COVID-19 lockdown can apply for a payment break on their mortgage of up to three months.

Some 1.7million payment freezes have been granted so far, according to banking trade body UK Finance – accounting for around one in seven UK mortgages.

Applications for the payment freezes were due to come to an end in June but now homeowners who haven’t already asked for one have until October 31.

Not all banks are said to be happy with offering further extension to all customers, with some preferring to offer the support only to those who need it the most.

Will a payment holiday affect your chances of getting a new mortgage?

IT’S up to individual lenders to decide whether or not they take into account a coronavirus payment holiday when considering a mortgage application.

Although they can’t see a payment break on your credit score, they may use other methods such as Open Banking where it will show up.

Here’s what the banks have said they will do, according to MoneySavingExpert:

Barclays has said that it won’t necessarily use information of a payment holiday due to the pandemic when assessing a new mortgage application.

For example, a payment holiday with another lender won’t have an impact on your mortgage application.

  • Bank of Scotland, Halifax and Lloyds

All three banks are owned by Lloyds Banking Group. They’ve said that it will take payment breaks into consideration when deciding whether to lend to you, even if you took it out due to the coronavirus crisis.

Both are part of the same banking group, Royal Bank of Scotland. The policy here is that a coronavirus payment break would be considered but having one itself wouldn’t prevent someone from being approved a new mortgage.

There had been reports that payment holidays could be extended to last for 18 months and that mortgage borrowers could be split into three groups.

The first are those who can return to normal repayments after three months, the second have a good history of repayments but need the freeze extended in the short-term, and the third are those with no real prospects of repaying who may need debt advice.

But today’s advice applies to all customers who feel they are unable to keep up with repayments.

The missed cash will need to be repaid by either adding it onto your remaining payments or the end of your mortgage term – but homeowners have been warned that it could end up costing them £2,769 in higher repayments.

The watchdog is urging borrowers to continue making the payments if they’re able to do so.

The FCA also says that banks must offer borrowers further support if they are still in financial difficulty after the payment break, including a further three month freeze on repayments.

Normally, taking a payment holiday would negatively impact your credit score and affect any future borrowing but freezes taken due to the coronavirus pandemic won’t.

But the watchdog warns that lenders may still be able to see that you’ve taken a break on payments through other sources, such as your bank account information.

Christopher Woolard, interim chief executive at the FCA, said: “The measures we have confirmed today will mean anyone who needs to can get help from their lender, if they are still struggling to pay their mortgage due to coronavirus.

“It is important that if a consumer can afford to re-start mortgage payments, it is in their best interests to do so.

“Customers should talk to their firm about the best option available for them.”

The guidance comes into effect from June 4 and only applies to mortgages -an extension to payment holidays for credit cards, personal loans or car finance deals has not been granted.

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Martin Lewis explains how the costs can quickly mount up on mortgage holidays

 





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