LONDON: Borrowers who are taking a three-month mortgage payment holiday are set to be able to extend it for another three months, or start making reduced payments.
Three-month mortgage payment holidays are already available for borrowers who are struggling due to the financial impact of coronavirus. But the Financial Conduct Authority (FCA) has now proposed that, for customers who have not yet asked for one, the time to apply for one would be extended until October 31.
The current ban on homes being repossessed will also be continued until October 31 under the plans. For those who are still experiencing temporary payment difficulties due to coronavirus, firms should continue to offer support – which could include extending a payment holiday by a further three months or starting to make reduced payments under the proposals.
More than 1.8 million mortgage payment holidays have been taken up, and the first of these are due to come to an end in June.
Laura Suter, personal finance analyst at investment platform AJ Bell, said: “The three-month extension of mortgage holidays will be welcome relief for those households struggling with a fall in income and uncertain job prospects during the current crisis.”
But she added: “Based on the average mortgage in the country, UK banks were already set to make more than £800 million more in additional interest by people taking a mortgage holiday and that will leap up now the period has been extended.
“While the break in payments will be a lifeline for some people, they should research all the options first, including extending their term to reduce monthly payments, seeing if they can switch to a lower rate or switching to interest-only for a period.”
The FCA is inviting feedback by May 26 and expects to finalise the guidance, which applies only to mortgages and not other credit products, shortly afterwards.