Mortgage Holidays Will End by 31 October, FCA Confirms

The Financial Conduct Authority (FCA) has confirmed that mortgage holidays will end by 31 October 2020 and that any support homeowners receive beyond that point will be marked on their credit files.

As of June, lenders had granted 1.9 million mortgage holidays to borrowers since the pandemic began. These payment holidays haven’t been recorded on customer’s credit files, so won’t impact their eligibility for other lending products in the future. However, their mortgage provider may consider these holidays when the borrower applies to remortgage.

The FCA said these reprieves on mortgage payments were always supposed to be temporary and has already outlined more “tailored” support measures that banks and building societies may offer to customers who are continuing to struggle to afford payments. 

This new guidance on customer support comes came into effect on Wednesday. The long and short-term support measures banks may offer include extending the term of a customer’s mortgage; changing the type of mortgage a customer holds, for example from a repayment to an interest-only mortgage; and allowing them to remortgage to a lower interest rate or to defer payments.

The FCA has discouraged lenders from adopting a “one-size fits all” approach for their struggling customers and said it will be monitoring firms to ensure they are treating customers fairly and taking into account their individual circumstances.

Lenders have also been told prioritise support for borrowers at most risk of harm or who face the greatest financial difficulties.

But any forbearance that extends beyond 31 October will impact credit scores, the FCA said. Homeowners should therefore only take payment deferrals past that date if they absolutely need to do so.

Christopher Woolard, interim chief executive at the FCA, said: “It is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”

Miles Robinson, head of mortgages at online broker Trussle, said: “It’s important to know that unlike before, if you need financial support from your lender after 31st October, it will be marked on your credit file. We’d urge homeowners to only utilise the mortgage payment holiday if it’s essential.

Robinson also cautioned customers considering mortgage holidays that when they end, their monthly payments will increase slightly.

“This is because the additional interest is added to your total mortgage balance. Some lenders offer other potential options, which include switching some of the loan amount to interest only payments in the short term.”

Lenders have already drawn criticism over claims that they will make £600 million in extra interest payments as payment holidays increase customers' mortgage terms.