ResidentialJul 31 2020

FCA seeks views on mortgage support

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FCA seeks views on mortgage support

The Financial Conduct Authority (FCA) has issued a call for input on how firms should treat consumers who are coming to the end of their second mortgage payment deferral.

The regulator is asking for early views from mortgage providers, consumer groups and credit providers as it considers extending its current guidance on payment deferrals for mortgage and consumer credit products beyond October 31.

It said: “[We] want to get early views on the support needed by consumers who have already benefitted from our temporary guidance but remain in difficulty.

"We are also seeking views on whether and under what circumstances any aspect of our current guidance should continue beyond 31 October and, if not, what if anything should take its place."

Borrowers facing financial challenges amid the virus-driven economic downturn were initially given a three-month mortgage holiday option in March.

Those still struggling to make their mortgage repayments after their holiday came to an end had the option to make reduced repayments for a further three months, or a further three-month deferral.

Under its ‘mortgages and coronavirus’ guidance the regulator asks firms to not charge clients any default or arrears charge or other fee in connection with their payment deferral.

The FCA said its call for input was influenced by the fact that many consumers who have been given a second payment deferral will have deferrals that end from September onwards.

It said: “These consumers will have a range of needs and circumstances. Some will still be in temporary payment difficulty. And some will be in longer term difficulty.

“Our research shows that consumers with deferrals who do not expect to resume full repayments appear to be particularly vulnerable compared to those expecting to resume full repayments.

“We want to ensure that all consumers who need it get appropriate and sustainable support when their current temporary arrangements end.”

According to the FCA, firms have provided more than 1.8m mortgage payment deferrals and 1.6m personal loan and credit card payment deferrals.

Richard Lane, director of external affairs at StepChange, said: “As the FCA recognises, the picture of who will need further help and what kind of help they will need is complex. The demand for debt advice will increase as more people roll off the temporary payment deferral schemes and see their financial difficulties crystallise.

“It is interesting to see the regulator setting out a firm expectation that it does not expect a blanket extension of payment holidays to be the right answer generally for people who cannot afford their payments.

"Instead, the FCA expects lenders to show a more considered view of forbearance – with all that that implies, in the form of putting in place affordable repayment plans for those who need them.”

Borrowers who have not yet taken a mortgage payment deferral have until October 31 to apply for one.

Kevin Dunn, director at Furnley House, commented: "We have had a couple of clients in recent weeks, who although they’ve taken a payment holiday, have chosen to continue to overpay the interest amount each month, to stop the mortgage rolling up too much.

"I think a more sensible approach, rather than for a full payment holiday, would be to encourage borrowers to pay a percentage of their payments, [which] would act as a sort of half-way house."

chloe.cheung@ft.com