Mortgage Payments during Covid
Mortgage Payments during Covid
Mortgage Payments
Back in March / April 2020, the Financial Conduct Authority (FCA) fully recognised the huge problems initially created with the first National Lockdown.
As a result the FCA agreed with all Mortgage Lenders that anybody affected by the Lockdown could request up to 3 months “payment break”.
At that time the Banks agreed NOT to mark Credit Files with negative marks on the Credit Records.
As a result of this decision, it is now thought that around 2.5 Million people have asked for a payment break since March 2020.
The Saturday Telegraph (7th Nov) reported that from their analysis, that 90,000 homeowners have already missed payments after their mortgage holiday(s) have expired.
It is also thought that a further 300,000 households could face a shock in the coming weeks as their payment breaks end.
As a result of these concerns, 30+ MP’s have sent a Letter asking the FCA to rethink the 6 month limit.
Stepchange the Debt Charity, are also fearful that struggling households would face a lender lottery when they sought help, especially because of the pressure of reduced staffing levels / home working of the Banks etc.
It is concerned that without further assistance, those who are struggling may feel under pressure to resume payments or accept unaffordable “forbearance” offers, particularly if they have concerns about negative credit reporting.
The FCA have now reiterated that consumers should keep up with payments on their mortgage if they can afford to do so and should only seek support where such support is absolutely necessary.
In November 2020, the FCA has now provided more detail on which groups of consumers who will and won’t be able to access payment deferrals:
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.
Sheldon Mills, interim Executive Director of Strategy and Competition at the FCA said: ‘Today we have confirmed further support for borrowers struggling financially as a result of coronavirus.
‘The announcement we have made, ensures that the support offered through payment deferrals is as flexible and accessible as possible.
This means borrowers will again be able to access payment deferrals up to a maximum of 6 months. However, if you are able to keep paying it will be in your best long-term interest to do so. Payment deferrals should only be taken when absolutely necessary.’
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, 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.
Interest Only Mortgages
In October, the FCA issued separate guidance for borrowers with interest only or part-and-part mortgages whose capital repayment plans were affected by the crisis.
This means that borrowers whose mortgages matured from 20 March 2020 can delay the repayment of the capital on their mortgage until 31 October 2021.
The FCA has today confirmed that as well as accessing payment deferrals before maturity, these borrowers can access payment deferrals after maturity without this affecting their ability to delay the capital repayment.
Credit Scoring
Payment deferrals under these proposals would not be reported as missed payments on a borrower’s credit file.
This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.
Alternatives to Missed Payments
In addition to furlough issues, people are now losing their jobs.
Because of this another major concern is that it is NOT a good idea to borrow money from elsewhere. At the very least consider the options below or consider taking debt advice before taking that decision.
Options instead of Missed Payments
It should clearly noted that there are several options available to homeowners at the end of the mortgage holiday, or including, such as :-
Extending Term of the Mortgage, thus reducing monthly payments.
Making Interest payments only for an agreed period of time - open to review
Resume payments but a lower figure
Tailored support may be reported on a borrower’s credit file, and lenders should inform borrowers where this will be the case. Any payment deferrals offered as tailored support could be recorded on a borrower’s credit file.
The FCA has also confirmed that no one should have their home repossessed without their agreement until after 31 January 2021.
