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Summary
- The Financial Conduct Authority (FCA) is expected to make an official announcement and propose updates on the same shortly
- The further extension of the financial rescue package will help those facing extended furlough or ongoing pressure on their incomes
- Borrowers were previously told to apply for a mortgage payment holiday by 31 October
As England enters the second lockdown from 5 November to 2 December, UK homeowners are set to get up to six months mortgage holiday extension. Following the new lockdown restrictions, UK Finance, the national trade body for the banking industry, announced that they will be able to top their mortgage payment holiday to up to 6 months without it being recorded on their credit file.
The extension of the financial rescue package will help those facing extended furlough. However, mortgage experts have warned that borrowers should be seeking help if required because payment holidays can cost more in the long run. Borrowers were previously told to apply for a mortgage payment holiday by 31 October. From the time UK chancellor Rishi Sunak had introduced the scheme, it has been extended multiple times.
Do Read: UK banks decide to offer mortgage holidays as a fallout of the coronavirus epidemic
The Financial Conduct Authority (FCA) is expected to make an announcement and propose updates soon on the extended mortgage holiday and for providing guidance on supporting mortgage borrowers. The mortgage payment holiday began in March and was supposed to come to an end on 31 October 2020. It is likely that the extension will be granted for another six months, if media reports are to be believed.
FCA will be considering the effects for consumer credit, such as overdrafts credit cards and personal loans. FCA will propose that mortgage borrowers who have not yet had a payment holiday can request one, in order to help the financially stricken borrowers. Customers who already have a payment deferral for a period of less than 6 months would be able to extend it.
It also added that the borrowers should speak to their lenders to agree tailored support in case they have already had a six-month payment deferral and are still experiencing payment difficulties. Tailored support, includes deferring payment of the interest or the sums due, extending the mortgage term or switching temporarily to interest-only payments.
FCA would be working closely with trade bodies and lenders on swift implementation of new guidance. Also, it has urged the borrowers that they need not contact their lenders yet as the information on the changes for customers are yet to be declared.
Eric Leenders, managing director of Personal Finance at UK Finance, said that lenders should be ready to deliver assistance to those in need in the ongoing crisis. He also added that the financial sector is working closely with the FCA to ensure that the customers impacted by the new lockdown measures will be able to access the support.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that the extension will provide many borrowers with some comfort, who are worried about paying their mortgage. However, it should be asked only if needed, said Mark.
Also Read: Banks Restart Their Mortgage Services for Homebuyers in the UK
UK prime minister Boris Johnson revealed a host of new measures in England on 31 October, which are aimed at curtailing the rising number of Covid-19 infections. England has touched the 1 million mark of the Covid-19 cases and is likely on the verge of facing the second wave of coronavirus infections.
The United Kingdom, which has the biggest official death toll in Europe from Covid-19, is witnessing more than 20,000 new coronavirus cases a day and has been warned that the cases can go up to 80,000 deaths in the second wave.
Some of the key points of the new lockdown restrictions:
- Brits should stay home and only move out if necessary, like for schools, colleges, universities, or work
- School, universities, and colleges will remain open
- Non-essential shops, venues such as leisure and entertainment will remain close
- Pubs, bars, and restaurants will be closed except for takeaways
- No two or more households should meet indoors or in parks, except in support bubble
- Outdoor recreation is encouraged as long as you meet only one person outside your household
How Will Payment Holiday Affect The Chances of Securing a New Mortgage
Let’s have a look at what the major banks of the UK had to say on this, as per MoneySavingExpert:
Barclay’s PLC (LON: BARC)
Barclays has said that while assessing a new mortgage application, it will not be necessarily using the information of a payment holiday due to the pandemic. A payment holiday with another lender will not have an impact on your mortgage application.
On 2 November at 11:35 AM, Barclay’s PLC shares were trading on the London Stock Exchange at GBX 106.46. The stock price closed at GBX 106.56 on 30 October 2020. The total market capitalisation of the company was £18.491.40 million.
Lloyds Banking Group PLC (LON: LLOY)
The Group has said that it will take payment breaks into consideration when deciding whether to lend, even if one took it out due to the coronavirus crisis.
On 2 November at 11:40 AM, Lloyd’s Banking Group PLC shares were trading on the London Stock Exchange at GBX 27.54. The stock price closed at GBX 28.03 on 30 October. The total market capitalisation of the company was £19,842.30 million.
NatWest Group PLC (LON:NWG)
The Group’s policy indicates that a coronavirus payment break would be considered but having one itself would not prevent someone from being approved a new mortgage.
On 2 November at 11:42 AM, NatWest Group PLC shares were trading on the London Stock Exchange at GBX 120.70. The stock price closed at GBX 124.20 on 30 October. The total market capitalisation of the company was £15,061.99 million.
