As things change rapidly during the coronavirus (COVID-19) crisis, this guide will be updated regularly to reflect changes in rules and regulations.
In response to the coronavirus outbreak, the UK Government has announced that mortgage lenders will offer a three-month mortgage holiday to their customers in financial difficulty.
However, limited information was provided about the scheme, leaving consumers confused as to their options and lender call centres inundated with calls. This guide is here to help.
Update: The Financial Conduct Authority (FCA) has announced some changes to the way that mortgage holidays can operate. These rules will come into force from Thursday, 4 June 2020.
If you have not yet applied for a payment holiday and you’re experiencing financial difficulties you now have until 31 October 2020 to request one.
The current ban on mortgage lenders repossessing homes will also extend to 31 October 2020.
If you’ve been offered a payment holiday, but you’re still facing financial difficulties, you can ask your lender to extend the holiday for another three months.
The FCA has said that it will expect mortgage lenders to contact their customers to find out what they can afford to repay and support customers where they need further help. This should include the option of either another full 3-month holiday or a part-payment holiday.
Remember there is a cost to taking a payment holiday. Read the rest of this guide for more information on how a mortgage holiday works.
We have also created a handy tool that will help you understand if this is the right option for you. The tool will show you what the impact on your future payments could be if you were to apply for a mortgage holiday with your lender.
Taking a payment holiday will mean that you will not have to make your monthly mortgage payment for an agreed period (in this case up to 3 months). Instead, the monthly payment is deferred to a later date.
It’s important to remember you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid.
No. You will still need to make the payments from the holiday period, just at a later date. You will be accruing interest on those payments in the meantime, so there is a cost to taking a payment holiday.
Mortgage payment holidays are meant for those facing severe financial difficulties who feel they won't be able to afford to make their mortgage repayments. As mentioned above, mortgage payment holidays are not a free lunch. They are a deferral of payment at a later date. Even if you were you take the money you save on not making mortgage repayments, and invest it in a savings account, interest rates on most savings accounts are so low these days that it's unlikely you will end up with much more money in the long run. This is especially true if you factor in the amount your mortgage payments increase by after the payment holiday ends.
Lenders are offering different options for payment holidays, so it is essential that you contact your lender to discuss what will work best for you. Here are some common ways of making up the deferred monthly instalments after a payment holiday:
adding the deferred instalment(s) to your outstanding mortgage balance (capitalising the amount), so that you pay it over the remaining term of your mortgage
agreeing to a short-term payment arrangement to clear the deferred instalment(s) over several months
extending the original term of your mortgage
Mortgage lenders across the UK are offering payment holidays to their customers who are affected by the coronavirus. There are some lender-specific eligibility criteria you need to meet to get a payment holiday. To find out if you’re eligible for a mortgage payment holiday, select your lender in our portal to find out more about your lender’s criteria.
No. Any impact from the crisis that could leave you struggling financially could result in you being considered as affected.
Most lenders will ask you to contact a specific team to help assess your options if you are already in arrears on your mortgage.
It is worth doing so, as they may be able offer multiple ways of helping you, including a mortgage payment holiday.
No, you must contact your lender first to agree to a payment holiday before taking any action with your direct debit.
If you cancel your direct debit without agreeing to a payment holiday with your lender first, this may be reported as a missed payment.
If you are currently up to date with your mortgage payments and your lender agrees to a coronavirus payment holiday, then your credit record will not be negatively impacted.
You should apply with your mortgage lender. Depending on your lender, this may be through an online form, an email or a phone call.
Lenders are experiencing very high call volumes at the moment, so getting through to somebody may take longer than usual. It is worth checking if the lender has an online form that you can submit instead.
Due to extraordinarily high application volumes for payment holidays, it may be that your lender is only able to process and start your mortgage payment holiday from next month’s monthly payment, especially if your next payment is in the next 10 days. You should contact your lender if this is going to be an issue for you.
If you are planning to stay with your lender and get a product transfer, it may be easier to switch to a new product before applying for a mortgage payment holiday.
If your initial end date is still a few months away, taking a payment holiday won’t affect your ability to switch to a new product.
If you are a buy-to-let landlord and your tenants’ ability to pay rent is affected by the coronavirus, some lenders may be able to offer you a mortgage payment holiday. You will need to speak to your mortgage lender to check your eligibility and apply.
If you are a renter and affected by the coronavirus, you will need to speak to your landlord to arrange a temporary solution. The government has advised that if a landlord receives a mortgage payment holiday for their buy-to-let mortgage, they are expected to pass on this relief to their tenants. The government has also put a temporary freeze on evictions to help protect renters affected by the coronavirus.
Payment holidays are just one option that lenders can offer, so it is best to contact your lender and discuss everything that can be done to help.
Other alternatives to payment holidays could include:
Move your mortgage to interest-only payments for a short period
Defer your interest payments for a period
Extend your overall mortgage term (reducing your monthly payments)