COVID-19 Mortgage Payment Holidays
What is the government proposing?
On 17th March, the government announced that anyone struggling as a result of the coronavirus outbreak will be able to take a three-month mortgage repayment holiday. It has been confirmed that this will apply to all residential and buy to let mortgages, as well as those with Help to Buy equity loans. All lenders are required to comply.
It is important to note that the government’s package is a deferment of mortgage payments, not a cancellation, therefore the payments will still need to be made at a later stage. During the payment holiday, the amount of capital that you owe will stay the same, however you will still be accruing interest on this. When the three months are up, your lender will review your financial situation with you and agree an amended payment schedule. Your credit rating will not be affected by taking an offer of a mortgage payment holiday.
The FCA has indicated that it may extended the three-month period of the mortgage payment holiday if they deem it necessary. This will be under ongoing review and amended guidance will be issued if appropriate.
Who should consider this option?
Anyone concerned about meeting their mortgage payments as a direct result of the coronavirus should consider this as an option.
It is important to note that you can only apply for this relief once, and that your lender may also offer other options if they are more appropriate for your circumstances.
If you are a landlord, you will only qualify for a mortgage payment holiday on your buy to let mortgage(s) if this relief is passed on to your tenant(s).
How do you set it up?
To set up a mortgage payment holiday, you should:
- contact your lender directly – intermediaries are unable to do this on your behalf. There should be no fee charged to set this up and decisions should be made relatively quickly. Many lenders have set up online forms as an alternative to phoning. This is recommended where possible as lenders are experiencing very high call volumes and online forms are often a much quicker route.
- You will need to self-certify that your ability to make the payments has been impacted by the coronavirus pandemic or that your tenants’ income has been affected.
- If you are already in arrears with your mortgage payments, you may still be eligible. Lenders are encouraging customers in arrears to get in touch so that available options can be discussed.
- Keep a record of the conversation with your lender or save the email trail in case you need proof that the agreement was in place at a later date.
- Keep paying your Direct Debit until you’ve spoken to your lender and obtained agreement. Otherwise this could be registered as a missed payment on your credit file and would significantly impact your ability to get finance of any kind in the next five years.
Is a payment holiday right for you?
Whilst everyone’s circumstances are different, there will inevitably be some longer-term implications and it’s important to be clear about these before signing up.
Pros:
- Provides breathing space without affecting your credit rating as long as you get agreement from your lender.
- Good way for landlords to avoid rental voids.
Cons:
- Your monthly mortgage payments could increase and / or you could end up with a slightly longer mortgage term.
- If you are on a fixed rate, deferring payments could push you onto an SVR which would be higher than your current monthly payment.
- You will still accrue interest on the capital that you owe.
- As a landlord, if you are considering purchasing any buy to let property in the future, it is currently unclear how lenders will treat this from an underwriting point of view regarding the affordability of your portfolio.
Contacts
On the following pages we have compiled a list of the relevant contact numbers and online form addresses for key lenders.
If your lender is missing from the list, please visit their website in the first instance or alternatively contact Darren Johncock on 01932 870030 or 07912 762970 or email Darren.johncock@hfmcwealth.com for further information or any assistance with the above.
Contact details for key lenders
