Unless you have been sleeping in a cave then it’s hard to not know that the world is currently dealing with a global health crisis. 

It is having an effect on everything and everyone. 

It is far from ‘business as usual’ and this has resulted in many people losing their incomes through no fault of their own. 

With this in mind, it leaves people worrying about how they are going to pay their bills. The biggest of which for most people is their regular monthly mortgage payment. 

The mortgage payment holiday system

The Government has introduced a mortgage payment holiday system that may provide respite from monthly mortgage payments for certain people who need to take advantage of the facility.  

However it’s important to mention, it is not free money and it does have to be paid back, so if you don’t need this facility try not to sign up for it and continue you monthly mortgage payments as usual if you can. 

After the payment holiday is over you will end up paying increased monthly payments to your lender. You will still owe the lender the same amount as you do now, but interest will continue to accrue on this amount.

This means it will take you longer and cost you more to clear your mortgage.  

To help explain how it works, I’ve summarised what we know, in no particular order:

  • Financial Conduct Authority guidelines published on 20thMarch 2020 state that lenders should not charge borrowers additional fees to set up a mortgage payment holiday facility. 
  • Under the Governments new policy currently you can apply for a mortgage payment holiday of up to x3 months if you are up to date with your current mortgage payments and not in mortgage payment arrears.
  • Mortgage payment holidays are also available for Buy To Let Landlords as well and the Government expect these Landlords who take this facility to pass on the benefit of the payment holiday to their tenants who are probably unable to pay their rent because they have lost their income and Landlords will also need to certify to their current lender that their tenants ability to pay rent has been affected by the Coronavirus.
  • You won’t need to go through any new affordability tests with your current lender, you will need to certify to your current lender that you need a mortgage payment holiday for a valid reason – it’s usually that you have lost your income as a direct result of the Coronavirus but it could also be for the sake of your mental wellbeing also.
  • After your mortgage payment holiday ends your lender will contact you to discuss how you can repay the missed payments and the best way forward for your individual needs and circumstances. It could be they agree to extend your mortgage term or increase your monthly payments but there are a range of options open to them to put in place so you can repay the deferred payments because as I said earlier they will need to be repaid to your lender at some point.
  • The UK trade body that represents banks and building societies (UK Finance) has stated that its members ‘will make every effort’ to ensure that those borrowers taking a mortgage payment holiday because of the Coronavirus should not have their credit rating adversely affected so in short, taking a Corona Virus mortgage payment holiday won’t have an effect on you securing credit in the future with other lenders or credit providers.
  • In order to apply for a Coronavirus mortgage payment holiday, you should in the first instance contact your existing lender on their customer services helpline number which you can usually find on your annual mortgage statement or online on their website.

Now, to be fair the lenders are having the same staffing challenges as the rest of the UK  and it is highly likely that you will be on hold for a considerable amount of time (an hours wait is not unheard of currently), so when the person on the other end of the telephone answers – be nice to them, they are there to help and assist and like you they have their own Coronavirus challenges as well. 

We are all operating in unprecedented circumstances, so let’s work together to find the right solutions.

On behalf of us all here at Simpson Financial Services, please keep yourselves and your families safe and well. 

Do not go out of your home unless you absolutely have to and follow Government advice as and when it is issued.

Over the next few weeks, we will be adding plenty of advice regarding mortgages, but also many other financial topics too. If you’d like to view them as they become available, please follow us on Social Media (Facebook & LinkedIn).

If you have any questions, or need to seek financial advice – please call us on 0800 6342 111 or enquire here.