The Treasury recently announced that homeowners who are struggling to pay their mortgage due to the ongoing coronavirus crisis will now be able to extend their payment holiday for a further three months.
Here’s everything you need to know.
When will the application period for a mortgage holiday now run until?
Chancellor Rishi Sunak first introduced mortgage holidays in March for anyone struggling financially due to the Covid-19 outbreak. This was shortly before the country went into lockdown.
Over 1.8 million people have since claimed the mortgage holiday, at an average of £755 per month, according to trade body UK Finance.
The application period for a mortgage holiday will now run until 31 October. This will allow those struggling during the ongoing coronavirus crisis to continue to claim support.
The extension means that households will be able to prolong the break, or reduce their monthly payments through their bank or building society without having their credit scores affected. The current ban on repossessions of homes will be continued until the same date.
What is a mortgage holiday?
A mortgage repayment holiday is a financial 'break' from your monthly repayment. It is available for customers who are unable to make their usual monthly mortgage payments.
However, your payment will not be waived but simply deferred. If you do choose to take a payment holiday you need to be aware that the amount you owe will increase. This is because you will still be charged interest, and the missed payments will be made up over the remainder of the mortgage term.
‘Making sure people get the support they need with their mortgages’
Economic Secretary to the Treasury, John Glen, said, "We’re doing everything we can to help people with their finances at this difficult time, and that includes making sure people get the support they need with their mortgages. That's why we’re working with the banks and lenders to extend payment holidays if people need them.
"Everyone’s circumstances will be different, so when homeowners can pay some or all of their mortgage, they should work with their lender on a plan; but if they are still struggling, I want them to know that help is there."
Lenders should now be contacting all borrowers with a repayment holiday before it comes to an end in order to lay out potential next steps and the support that is available.
Christopher Woolard, Interim Chief Executive at the FCA, said, "Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.
"Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday, will also continue to be able to apply until 31 October."
If you’re looking at applying for a mortgage holiday, most banks have online forms to help make it easier for customers if they know this is the best option for them. Look at your mortgage provider’s website for all of the contact options.