Coronavirus  

How government and BoE steps are affecting clients' mortgages

  • Describe the implications of the government mortgage holiday
  • Identify the impact of BoE measures on the housing market
  • Explain what has happened to the housebuying market
CPD
Approx.30min
How government and BoE steps are affecting clients' mortgages

With the country in the middle of a crisis, the government faces the heavy task of rolling out measure after measure, in a bid to save the UK economy.

One of these measures has been to keep the mortgage market alive by getting lenders to offer borrowers the option of taking a three-month mortgage payment holiday.

Under the plans it will be available to all customers who are up to date on their mortgage payments. 

Average weekly spend on mortgages in UK households 
YearAmount (£)
2015-16147.60
2016-17154.90
2017-18156.50

Source: ONS

A note from broker Ablestoke says this means that lenders will not complete an income and expenditure assessment, or an assessment of alternate payment options as ordinarily required under MCOB.

Lenders have a number of options available and will work with customers to find the best solution for them. 

The proposal is intended to allow lenders to be more responsive to customer needs and offer forbearance in a simple way to customers in an environment where the operation of collections teams made be also impacted by Covid-19.

Customers will be made aware that interest will accrue in the holiday period and they will need to make up deferred payments in the future.

Customers who wish to undertake a full assessment of their ability to pay or financial difficulty may still do so.

A payment holiday will also be available to all buy-to-let landlords whose tenants have lost income because of the impact of Covid-19. 

Landlords are expected to pass on this relief to their tenants to ensure that they are supported during this time.

Customers will still owe the money where a payment holiday has been granted and interest will still accrue.

So if borrowers are able to make part of their normal mortgage payments to reduce the money they owe or their interest charges then they should consider doing so.

UK Finance says: “Firms will make every effort to ensure that the payment holiday does not negatively impact on your credit file.

“If you are already in arrears, you should contact your lender as soon as possible. Lenders will review any change to your circumstances to ensure that payments remain sustainable.

“If borrowers are already experiencing financial difficulty, lenders have also agreed a three-month moratorium on residential and buy-to-let possession action (from 19 March 2020), meaning that no homes will be repossessed at this difficult time.

In the wake of the coronavirus crisis and following the government’s announcements Bob Riach mortgage broker at Riach Financial says he has been very busy fielding calls from mortgage customers who want to know how they can go about requesting the payment holiday.

“It’s a good idea that the lenders are saying it won’t go on credit reports. [One credit reference agency] has confirmed to me it won’t go on credit reports,” Mr Riach says.

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. No interest will accrue on borrowers mortgage payments, during the three month mortgage holiday, true or false?

  2. Lenders are not putting the payment holiday on borrowers credit reports, true or false?

  3. What impact will the mortgage and rent holidays have on the mortgage market, post virus, it is anticipated?

  4. What is happening among lenders, following the cut to base rate by the Bank of England?

  5. What is the main reason why people might not remortgage?

  6. Why is the housebuying market paused?

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You should now know…

  • Describe the implications of the government mortgage holiday
  • Identify the impact of BoE measures on the housing market
  • Explain what has happened to the housebuying market

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