The Financial Conduct Authority has warned no "responsible" mortgage lender should be considering repossession in the current market climate.
The regulator published guidance confirming lenders should offer struggling customers a three-month payment holiday in light of the spreading coronavirus pandemic and the associated economic fallout.
The FCA said the mortgage holiday should be granted where homeowners were experiencing payment difficulties as a result of Covid-19 - this can apply either where a customer first asks for leniency or a lender feels they qualify for the break.
The mortgage payment holiday for residential loans was announced by chancellor of the exchequer Rishi Sunak last week, and extended to buy-to-let loans a few days later.
But the watchdog said there was no expectation under its guidance for a lender to investigate the circumstances surrounding a request for a payment holiday.
Christopher Woolard, interim chief executive at the FCA, said: "We want to help firms support consumers during these unprecedented times.
"Our mortgage guidance underpins the actions taken by mortgage providers and will give confidence to both consumers and firms.
"In particular, we are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time."
The regulator also made it clear lenders were not to impose any additional fee or charge as a result of the payment holiday, other than interest accrued, and warned the mortgage holiday should not have a negative impact on the customer’s credit score.
Last week market upheaval forced the Bank of England to slash interest rates to a record low of 0.1 per cent as it battled to boost the economy against the pandemic.
The watchdog's latest mortgage guidance warned repossession should not be commenced or continued with "unless the firm can demonstrate clearly the customer had agreed it is in their best interest".
The FCA warned: "Firms should not commence or continue repossession proceedings against customers at this time, given the unprecedented uncertainty and upheaval they face, and government advice on social distancing and self-isolation.
"This applies irrespective of the stage that repossession proceedings have reached and to any step taken in pursuit of repossession. Where a possession order has already been obtained, firms should refrain from enforcing it."
Last week the government announced a raft of measures to also protect renters and landlords during the Covid-19 crisis, including extending the three-month mortgage payment holiday to buy-to-let investors and stopping evictions.
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