Mortgage payment holidays could be extended for a year – how savers may be affected
Mortgage payments are important for many Britons who are tied to repaying the loan for a number of years, and are often considered one of the most significant purchases in a person’s lifetime. However, the Chancellor, Rishi Sunak, announced in March that lenders were required to offer three month mortgage repayment holidays to help with the impact of COVID-19. The move was part of an unprecedented package offered by the government to provide financial assistance for struggling families.
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But it is understood these mortgage holidays could be extended to help those still reckoning with the economic force of the outbreak.
The Financial Conduct Authority (FCA) has been implementing and enforcing the existing payment holiday, however, there are suggestions for this to be increased.
The Times reported a longer lasting payment freeze could be one of several measures put into place by the FCA to avoid loan catastrophe.
Without payment freezes, many Britons could find themselves defaulting on their mortgages or having their homes repossessed – although repossession action has temporarily ceased due to the pandemic.
One banker told the newspaper: “There are discussions going on about how to help consumers get through this period by extending mortgage payment holidays until people get back into jobs.
“The last thing everyone wants is a repeat of the 1980s and 1990s, kicking families out onto the streets.”
Upon announcement of the original mortgage payment holiday package, the FCA said the process would be reviewed.
It also added the payment freeze could be extended if it was appropriate to do so.
Shock figures recently revealed one in nine borrowers have been granted payment holidays as a result of the impact of coronavirus.
Lenders granted 1.2 million repayment holidays to help Britons along financially.
On average, this is a deferment of £775 per month in mortgage payments
Commenting on the payment holidays, UK Finance CEO, Stephen Jones, said: “Mortgage lenders have been working tirelessly to help homeowners get through this challenging period.
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“The industry has pulled out all the stops in recent weeks to give an unprecedented number of customers a payment holiday, and we stand ready to help more over the coming months.”
Mr Jones acknowledged payment holidays were not the correct solution for everyone, and advised Britons to discuss their circumstances with their lender.
The Money Advice Service has also offered assistance on mortgage payment holidays.
Backed by the government’s Money and Pensions Service, the advisory body provides information on a host of financial needs.
It urges Britons not to simply cancel their direct debit, as this will not count as a payment holiday, and instead will be seen as a missed payment – therefore potentially encroaching on an ability to remortgage.
The service also provides a mortgage holiday payment calculator to help savers understand the true cost of a mortgage holiday.
Mortgage payments will have to be repaid after the holiday ceases.
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