If you are struggling to pay your mortgage, the extension of the mortgage payment holiday scheme just announced may be welcome news.

Good news for anyone concerned about their ability to pay their mortgage due to the pandemic – mortgage payment holidays will now last until 31 July 2021. In new guidelines finalised today (20 November) by the Financial Conduct Authority (FCA), the financial watchdog says:

• If you have been affected by the pandemic for the first time and you wish to take the full six-month payment holiday, you should apply in plenty of time before your February 2021 mortgage payment is due. While you can apply for the full six months in total, lenders can only agree payment holidays of three months at a time. They can agree to renew your payment holiday after the first three months.

• If you have already taken a mortgage payment holiday of less than six months, you have until 31 March 2021 to apply for another one. In essence, borrowers on a payment holiday for less than six months can top up their deferment until they reach the six-month total.

The FCA has also said that nobody will have their home repossessed without its agreement until after 31 January.

In its finalised guidance issued today, the FCA says: ‘We expect firms to allow customers impacted by coronavirus to defer up to six monthly payments in total, but firms should not provide deferrals under this guidance for payments extending beyond 31 July 2021.’

What about your credit file?

The FCA clearly states that a customer’s credit file should not be impacted during any payment deferral granted under this guidance.

The financial watchdog advises anyone struggling to pay their mortgage to contact their lender as soon as possible. Lenders are expected to respond as quickly as they can but due to high levels of demand and working from home, it may take longer than normal for you to get a response.

Your lender should give you sufficient information in order for you to make a final decision about taking a payment holiday. They may direct you to their website for more information on the options available to you.

We advise only taking a mortgage payment holiday if you really need to. If you can continue to pay your mortgage, then you should certainly do so. Bear in mind that when your payment holiday ends, you will need to pay back what you owe, and your repayments may increase after your holiday. It’s also worth remembering that if you take a repayment holiday, you will most likely pay more interest on your mortgage in the long term.

What if you’ve already had a six-month payment holiday?

You won’t be able to apply for a mortgage payment deferral if you’ve already had a payment holiday of six months. However, the FCA says you might be able to ask for ‘tailored support’ from your lender. This will be based on your personal circumstances and could entail one of the following options:

• Not making any payments for a temporary period (this could be reported on your credit file)

• Making reduced payments temporarily

• Changing your mortgage term to reduce your payments and make them more affordable

If you are concerned about your ability to pay your mortgage, it’s important to speak to your lender or mortgage broker as soon as you can. Don’t delay things if you are concerned. We’re here to help so please feel free to contact us.

In the meantime, the FCA says that ‘given ongoing uncertainties’ as a result of the pandemic, it will keep existing guidance under review and amend or publish new guidance for lenders if required. We will keep you updated of any further developments.

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