Take a break with a mortgage holiday

MoneyExpert.com says up to six out of 10 mortgages offer holidays.

Hard-pressed homeowners are being urged to check the terms of their mortgage as they could be eligible for a break from their monthly payments, according to MoneyExpert.com*.

The independent financial comparison website says some 58 per cent of the 2,058 fixed, discounted and variable mortgage products on the market offer customers some form of payment holiday facility.

The figures show banks and building societies may already have gone some way towards fulfilling the Chancellor of the Exchequer Alistair Darling’s plea to lenders to help customers weather the credit crunch storm.

And the MoneyExpert.com figures show that the proportion of mortgages with payment holidays is actually on the increase. In September 2006 only 44.5 per cent of fixed and discounted mortgages included payment holidays, but now some 53 per cent include this facility. The overall proportion of products with a payment holiday available now rises to 58.5 per cent if you include variable mortgages in the analysis.

Sean Gardner of MoneyExpert.com said: "Lenders are aware they need to be flexible with their customers and are already ahead of the game – certainly more than the Chancellor might have us believe."

"With around six in ten mortgage products coming with a potential payment holiday written into the terms and conditions, cash-strapped homeowners can at least enquire about taking a break."

"Taking a payment holiday will need to be agreed with your lender and just because there’s a facility for it doesn’t mean your bank will let you off repayments easily. In fact while lenders are struggling your argument will need to be watertight – but banks would rather know you’re under the cosh now and intend to do something than wait until you’re defaulting because you can’t afford the repayments."

Payment holidays allow homeowners to stop their mortgage repayments for an agreed period. They are normally only allowed if you have been a customer for a set period of time and have regularly met your repayment schedule on your mortgage.

According to the MoneyExpert figures, customers with variable mortgages are most likely to have a payment holiday facility available to them, with two thirds of all variable products including this option in their terms.

Type of mortgage Number of products with payment holiday Total number of products % with holiday
Discounted 111 342 32.46%
Fixed 563 917 61.40%
Variable 529 799 66.21%
Total 1,203 2,058 58.45%

MoneyExpert.com says that normally homeowners look to a payment holiday if they become unemployed or switch jobs, take a career break, decide to start a family or lose another regular stream of income altogether.

Sean Gardner added: "Homeowners looking for competitive mortgage deals in the new tougher mortgage marketplace might be attracted by the prospect of taking a payment holiday to ease the financial burden if things get tough or if their circumstances change."

"Despite the Chancellor’s call for lenders to increase access to mortgage holidays, it’s worth remembering that a break from paying monthly doesn’t mean a break from paying interest – that’ll continue to roll onto your debt until you repay it in full."

Notes :
* MoneyExpert.com analysis 01.09.06 & 22.04.08

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