The financial regulator is set to allow borrowers to apply for a second mortgage holiday and extend its ban on home repossessions until next year.
In an update last night (November 2) the Financial Conduct Authority revealed further details of its plans to bolster support for mortgage borrowers ahead of a second lockdown in England later this week.
Over the weekend the regulator announced it would extend payment deferrals by up to six months and in yesterday's statement confirmed borrowers who had not yet had a mortgage holiday would be eligible for two deferrals across this time frame.
The FCA has also proposed borrowers who currently have a mortgage holiday will be eligible for another payment deferral of up to three months.
For those who have resumed repayments after a deferral, the regulator is proposing they are entitled to another holiday of up to three months.
The FCA has also proposed extending the ban on home repossessions until after the end of January next year.
Sheldon Mills, interim executive director of strategy and competition at the FCA, said the FCA was working with lenders to secure support for borrowers struggling amid the ongoing coronavirus restrictions.
Mr Mills said: "Tailored support will still be offered and remains the most appropriate option for many borrowers, but we are proposing to extend payment deferrals for additional support.
"It is in borrowers’ own long-term interest only to take a payment deferral when absolutely necessary.
"Those that are able to keep paying, should do so. This allows support to be targeted to those most in need."
Mr Mills also urged borrowers not to contact their lender yet and instead wait for further updates.
The FCA said some borrowers would not be eligible for a payment deferral, such as if they had already had two deferrals of up to six months, and suggested tailored support would be the most appropriate option in this case.
Mortgage payment holidays were introduced in March, and extended in June, as a way to support borrowers who were experiencing difficulties with making payments due to coronavirus restrictions.
According to UK Finance, an estimated 162,000 mortgage customers were still on a payment deferral as of October 9, down from a peak of 1.8m in June.
Credit score
Under the FCA’s proposals, borrowers would have until 31 January 2021 to request a payment deferral.
A payment deferral under these proposals would not be reported as missed payments on a borrower’s credit file. This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.
Tailored support may be reported on a borrower’s credit file, and lenders should inform borrowers where this will be the case.
Robin Fieth, chief executive of the Building Societies Association, said: "We recognise that the ongoing economic issues being caused by the pandemic are generating significant challenges for some households.
"Hence the extension of this payment deferral scheme. For those with a mortgage the best advice will always be to continue to pay if you can, and to discuss any concerns early with your lender."
rachel.mortimer@ft.com
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