We wished to put something together to help our clients as we understand that everyone’s circumstances are completely different, so we thought we would issue you the guide lines of the Financial Conduct Authority of how lenders are to deal with clients at these unprecedented times.
Please if you need any guidance please do get in touch. You can still ring our office number 01332 300300 and our advisers are here to help albeit working from home.
A ‘payment holiday’ means you agree with your lender that you will not have to make mortgage payments for a set amount of time. Payment holidays are designed to help you when you may experience payment difficulties – in this case because of the coronavirus situation.
It is important to remember that you still owe the amounts that you don’t pay as a result of the payment holiday. Interest will continue to be charged on the amount you owe.
This means that, at the end of the payment holiday, you will have to make up the missed payments. There will be various options for doing this, for example by increasing your monthly payments slightly, or by adding a short extension to your term. Your lender will be able to explain to you what options it offers.
Applying for a payment holiday
You should contact your lender if you are experiencing or reasonably expect to experience payment difficulties because of circumstances related to coronavirus.
What to do with direct debits
It is only a payment holiday if it has been agreed with your lender.
You should not cancel your direct debit without speaking to your lender first. Cancelling your direct debit is not a payment holiday and will be counted as a missed payment. This could show up in your credit file and may impact your ability to remortgage.
Interest on your mortgage during the payment holiday
You will still be charged interest during the payment holiday, unless your lender has told you otherwise.
When the payment holiday ends
At the end of the agreed payment holiday, you will continue to make payments. And you will need to agree with your lender a manageable way to make up the missed payments given your circumstances.
If you are still not able to make your full mortgage payments due to circumstances relating to coronavirus, then the lender may offer you a further payment holiday, or other arrangements, if these are appropriate to your circumstances.
Your credit file
Our guidance makes clear to firms that they should ensure that taking a payment holiday will not have a negative impact on your credit file.
Agreeing the payment holiday
We expect lenders to offer payment holidays to borrowers who are experiencing or reasonably expect to experience payment difficulties because of coronavirus, unless they consider another option is better suited and in your best interest. Many lenders have already committed to this.
Your lender may also offer other options if they are more appropriate for your circumstances, and where it is in your interest. You can discuss these with your lender.
You should not apply for a mortgage payment holiday if you are not experiencing or do not reasonably expect to experience payment difficulties.
If you are behind with your mortgage payments.
We expect lenders to offer payment holidays to borrowers who are experiencing or reasonably expect to experience payment difficulties because of circumstances related to the coronavirus, or another option better suited to your needs and in your best interest, whether or not you are already behind on your payments.
How long do I have to apply for a mortgage holiday?
If you are experiencing or reasonably expect to experience payment difficulties and may need a payment holiday, you should speak to your lender in good time before the next payment is due. Please be considerate of others when contacting your lender and allow those with much closer dates into the queue first.
You can apply for a payment holiday at any time before this guidance is reviewed in 3 months. The payment holiday will not start, however, until it has been agreed with your lender.
Contacting your lender at this time
Lenders have committed to responding as quickly as possible, but due to high levels of demand and staff having to work from home, service levels might be slower than usual.
You should speak to your lender in good time before the next payment is due.
- Ask yourself: Do I need to speak to my mortgage lender today?
- Consider: Can I do this through mobile online banking?
- Review: Is the answer already on my lender’s website?
Lenders are temporarily stopping repossession actions
During this current period of unprecedented uncertainty and upheaval we do not think people should be at risk of losing their homes. We therefore expect lenders to stop repossession action. This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by coronavirus. Many lenders have already committed to this.
If you already have a repossession order on your home
We would not expect the lender to go ahead with the repossession, unless you want them to. Please contact it to discuss your situation.
Choosing for your home to be repossessed
You may choose for your home to be repossessed if you believe it’s in your best interest – for example, because you’ve already made plans for alternate accommodation. If this is the case, please contact your lender so that it knows this.
Interest during this period
You will continue to be charged interest on the amount you owe, plus any fees and charges you owe according to your lender’s tariff of charges.
Financial implications if repossession is stopped
The amount you owe will increase because interest will continue to be charged. This means that you are likely to get less back if and when your property is repossessed and then sold by your lender.
If property prices go down between now and the time your property is sold then you might get even less back, or nothing if your property is sold for less than you owe.
Your lender will be able to give you more information on how this affects you.
If you do not want repossession to be stopped, contact your lender immediately.
Again we wish to help all we can, so please get in contact with any questions. 01332 300300.