MortgagesAug 6 2021

Lenders ‘reallocating funds’ for mortgage deferrals

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Lenders ‘reallocating funds’ for mortgage deferrals
ByRuby Hinchliffe

Lenders which put reserves aside to cushion for a potential uptick in customer arrears after the end of the mortgage payment holiday last month are now reallocating these funds, FTAdviser has learnt.

Mark Harris, chief executive of mortgage broker SPF Private Clients, told FTAdviser lenders were worried about missed mortgage payments and arrears, “but it turns out they are nowhere near the level expected at the start of the pandemic”.

As a result, Harris said he has seen some lenders looking to “reallocate funds back from the bad debts pot to new lending”.

The mortgage payment holiday, which was introduced in March 2020 and extended from October 2020 to July 2021 by the Financial Conduct Authority, allowed borrowers to defer mortgage payments by up to six months.

The latest UK Finance figures suggest 2.9m people took a mortgage payment holiday while the scheme was active. But it seems the majority have since brought themselves up to date with their payments.

Lloyds said it had released £837m so far this year “driven by improvements to the macroeconomic outlook for the UK, combined with robust credit performance”.

Santander said 256,000 customers took out a mortgage payment holiday, but 96 per cent have now caught up on payments.

Coventry Building Society, which released its interim results last week, said “most” of its borrowers were now repaying their mortgage payment holiday requests initiated in the thick of the pandemic last year.

Advisers also did not see much, if any, demand for mortgage payment deferrals towards the tail end of the holiday.

“We found quite a few clients took out a mortgage payment holiday when these were initially launched, where there was a lot of uncertainty around jobs and the economy,” said Greg Cunnington, director of lender relationships and new homes at Alexander Hall.

“But we do not know of any applicants actually still taking a payment holiday so the impact appears minimal. We just have not seen any real take up on the payment holidays this year.”

Aly Kassmam, director at Easier Finances, told FTAdviser all of its clients only took the initial three month holiday “whilst there was a degree of uncertainty after the first lockdown”.

He added: “We do not expect this to cause any issues due to the end of the holiday.”

David Hollingworth, associate director of communications at L&C Mortgages, agreed that “for many, we know that the huge wave of use in the early stages of lockdown was a precautionary measure and that many returned to making full payments quickly".

But lenders had to keep a contingency in place for the minority still set to be affected.