Find out how we expect mortgage lenders and administrators to treat you during the coronavirus (Covid-19) pandemic, and read about the steps we’ve taken to support you.
If you’re struggling to keep up with mortgage repayments due to coronavirus, or you’re coming to the end of a payment holiday and wondering what happens next, find out what your next steps may be.
Learn more about:
- payment holidays
- coming to the end of a payment holiday and what other support is available
- how repossessions are affected
- vulnerable consumers
- firms this guidance applies to
- support after 31 October 2020
We updated our guidance for firms in June 2020 on providing payment holidays for borrowers affected by coronavirus.
A payment holiday (also called a freeze or deferral) is a period of time agreed with your lender, when you don’t have to make mortgage payments. A partial payment holiday is when your lender lets you make reduced payments.
Payment holidays are designed to help you if you’re finding it hard to make payments – in this case because of coronavirus.
If you’ve not taken a mortgage payment holiday yet, you have until 31 October 2020 to apply for one. If you’ve already taken a payment holiday, but are still struggling with your payments, you also have until 31 October 2020 to apply for another payment holiday or partial payment holiday.
Both a payment holiday and a partial payment holiday are temporary, and you’ll still have to pay back the outstanding amount later. Interest will also continue to build during this time – unless your lender has told you otherwise – and your repayments may be higher after the payment holiday. You are likely to end up paying more in the long term.
If you find you’re in a better financial position than you had expected at the start of your payment holiday, then you can avoid extra costs by paying what you can.
- if you can afford to repay your mortgage, it's in your best interests to do so
- it's only a payment holiday if it has been agreed with your lender
- you should not cancel your direct debit without speaking to your lender first
- cancelling your direct debit is not a payment holiday and will be counted as a missed payment. This could show up in your credit file and affect your credit score, which may impact your ability to remortgage
Payment holidays and your credit file
Our guidance published in June 2020 (and our previous guidance published in March 2020) makes clear to firms that they should make sure that if you take a payment holiday then it won’t have a negative impact on your credit file.
However, you should remember that credit files aren’t the only source of information that lenders can use in lending decisions.
Factors other than payment history may also be relevant. For example, lenders may take into account your bank account information, your use of credit products, or how much you are in debt, when making a lending decision.
Further support and your credit file
If you need more support to get back on track at the end of payment holidays taken under our guidance, or if you’re given new support after 31 October, that extra support may be reflected on your credit file, depending on what is agreed with your lender and the level of payments made.
If any more support is provided, we expect lenders to let you know what this will mean for your credit file.
If you’re already behind with mortgage payments
We expect lenders to offer you a payment holiday if you’re having financial difficulties due to coronavirus.
If you’ve not taken a payment holiday yet, but are already behind on your repayments, you can still apply for a payment holiday until 31 October and you will get the support you need.
However, if you take a payment holiday, interest on any payments that you don’t make will continue to increase during this time, so it’s important to choose the option that is right for you and your financial situation.
If you’re already behind on your repayments, other options may be more suitable for you. Speak to your lender to find out what’s possible.
Contacting your lender
Lenders have committed to responding as quickly as possible, but due to high levels of demand and staff having to work from home, service levels might be slower than usual.
If you’re thinking of taking a payment holiday for the first time, you should contact your lender as soon as you think you may struggle to make your next payment.
If you have general questions for your lender, make sure you check their website first to see if the answer is available online.
Working with your mortgage lender
Before agreeing on an option, your mortgage lender should give you enough information and help so you can make an informed decision. This may include directing you to online tools.
They should explain to you that taking a payment holiday, or reducing monthly repayments, is likely to increase the amount you pay in the longer term. If you need more support after taking 2 payment holidays, your lender should also explain what impact this will have.
It’s important to be open and honest about your financial situation with your mortgage lender, so you can agree an option that is right for you.
If you’ve already taken a payment holiday, but are still struggling with your payments, you have until 31 October 2020 to apply for another payment holiday or a partial payment holiday. Speak to your lender to find out more about this support.
We published guidance for lenders in September 2020 on how they should support you when you come to the end of your second payment holiday.
Your mortgage lender will contact you about what happens when your payment holiday ends. Your options will depend on your circumstances.
- If you can start repaying your mortgage again, it’s in your best interests to do so. Your lender will work with you to find the best way of catching up on missed payments.
- If you cannot start repaying your mortgage in full, your lender may consider both short-term and longer-term options.
- Short-term options may include another pause on some or all of your mortgage payments.
- Longer-term options could include extending the repayment term or restructuring your mortgage in some other way.
Your lender should explain what these options will mean for you. This includes the impact on your credit file and any change in your monthly payments and outstanding balance. Remember, any extra support provided by your lender can be recorded on your credit file.
Where to find help managing money and debt
Remember, if you have longer-term financial problems or are in any other financial difficulty, other options may be more appropriate.
Find out more about managing money and debt if you've been affected by the coronavirus pandemic.
This information might also be helpful to you if you already had payment difficulties before the pandemic and may be in longer-term financial difficulty. Or, if you’re worried about how you will manage your payments and debts in the future.
Other payment holidays
These measures only apply to mortgages. They don’t apply to consumer credit products, such as credit cards and loans. Consumer credit products are covered by separate guidance that may be different from the guidance for mortgage payment holidays.
During this time of uncertainty and upheaval, you should not be at risk of losing your home. We expect lenders to stop repossession action until 31 October 2020.
This applies to all mortgage borrowers at risk of repossession, whether or not your income is affected by coronavirus.
However, you may choose for your home to be repossessed if you believe it’s in your best interests – for example, because you’ve already made plans for other accommodation.
In this case, please contact your lender to let them know.
Financial implications if repossession is stopped
If a repossession on your home is stopped and you do not maintain payments, the total amount you owe will increase as interest will continue to be charged (plus any fees and charges you owe according to your lender’s tariff of charges).
This means that you are likely to get less back later if your property is repossessed and then sold by your lender.
If property prices go down in the time between now and when your property is sold, then you might get less back, or even nothing if your property is sold for less than you owe.
Contact your lender for more information on how this might affect you.
If you don’t want repossession to be stopped, contact your lender immediately.
Mortgage lenders should consider the needs of vulnerable customers when carrying out these measures. Circumstances that may cause you to become vulnerable include:
- poor health (physical or mental)
- low financial or emotional resilience
- life events such as bereavement or divorce
- low capability, including poor digital skills (eg your ability to communicate and make transactions online), language and cognitive skills, and low financial capability.
Mortgage lenders should be aware that coronavirus and the associated public health measures are likely to worsen personal circumstances that can cause vulnerability.
They may also cause many people who would not normally think of themselves as vulnerable to suddenly face personal circumstances that can cause vulnerability.
If you think you’re in circumstances that mean you’re vulnerable, then it’s important that you let your lender know when you contact them, so they can work out how best to support you.
To meet the challenges coronavirus could pose to borrowers we expect all regulated mortgage lenders and administrators to comply with our guidance.
Where there are companies which are unregulated (who technically fall out of scope of our guidance) and who make decisions that affect mortgage borrowers, given the current emergency, we expect them to offer payment holidays as an appropriate response. Many of these firms are responsible for the mortgages of individuals often known as mortgage prisoners, who could be vulnerable consumers.
We will consider the extent to which they have adopted this guidance in assessing our regulatory approach and whether those companies, or senior individuals within those firms, are fit and proper as part of any future application for authorisation.
To check whether your lender is authorised, search the Financial Services Register.
If you’re facing difficulty paying your mortgage after 31 October, your lender should provide you with tailored support. This is available whether you need more support at the end of a payment holiday or if you need support for the first time.
They can provide short and long-term options to reflect your specific circumstances. This could include making no or reduced payments for specified period to give you time to get back on track, extending the repayment term or restructuring the mortgage.
If you need more support from lenders, either at the end of payment holidays or for the first time, this will be reflected on credit files in line with normal reporting processes. This will help make sure lenders have an accurate picture of your financial circumstances and reduce the risk of unaffordable lending. Firms should be clear about the credit file implications of any support they offer.
16/06/2020: Information changed Working with your mortgage lender section update following guidance update
02/06/2020: Information added new measures confirmed
22/05/2020: Information added Mortgages and coronavirus: updated draft guidance for firms
25/03/2020: Information added Information updated.