Find out how we expect mortgage lenders and administrators to treat you if you're experiencing financial difficulties because of coronavirus (Covid-19).
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.
- talk to your lender if you’re struggling to manage your finances
- if you can afford to repay your mortgage, even if it’s a smaller amount than usual, you should do so
- you shouldn’t cancel your direct debit without speaking to your lender first
- if you have general questions for your lender, check their website first to see if the answer is available online
Learn more about:
- support from your lender
- payment holidays
- tailored support
- where to find help managing money and debt
- help for customers in vulnerable circumstances
If you’re finding it difficult to pay your mortgage because of coronavirus, your lender should provide you with support. This support will be available if you’re struggling for the first time or if you’ve already had support that’s coming to an end.
Contacting your lender
Contact your lender as soon as possible if you’re finding it difficult to pay your mortgage. Contact details should be available on your lender’s website and on their other communications with you.
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 have a general question for your lender, check their website first to see if the answer is available online.
Working with your mortgage lender
Before agreeing on any support, your lender should give you enough information so you can make an informed decision. This may include directing you to their website, so you can learn about the different options available.
They should explain that, if you take a partial or full payment holiday, the amount you pay in the longer term is likely to increase.
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.
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 for a period of time.
Payment holidays are designed to help you if you’re temporarily finding it hard to make payments – in this case because of the pandemic.
However, it’s important to remember that:
- when your payment holiday ends, you’ll still have to pay back what you owe
- interest will continue to build – unless your lender has told you otherwise – so your repayments may increase after the holiday
- if you take a payment holiday, you will likely end up paying more in the long term
If your financial position improves, you can avoid extra costs by paying what you can.
Applying for a payment holiday
You can request a payment holiday of up to 6 months in total, but lenders can only agree a payment holiday of up to 3 months at a time. They can then agree to renew your payment holiday after the first 3 months, as long as this doesn’t take you over the 6-month limit.
You need to apply by 31 March 2021 and all payment holidays must end by 31 July 2021. Remember, carefully consider if you need a payment holiday – and make payments if you can.
- If you are newly affected by coronavirus, and you want to benefit from the full 6 months available, you should apply in good time before your February 2021 payment is due. Your payment holiday will then run between February and July.
- If you’ve already taken payment holidays of less than 6 months, you have until 31 March 2021 to apply for another payment holiday.
After 31 March 2021, you can extend an existing payment holiday up until the 31 July 2021, as long as:
- it doesn’t go over the 6-month payment holiday limit
- there are no breaks in the support
You won’t be eligible to apply if you’ve already had payment holidays of 6 months overall. Instead, you can ask for tailored support from your lender.
Payment holidays and your credit file
Firms shouldn’t report payment holidays, agreed under our guidance, as missed payments on your credit file. This should help to minimise the impact on your future credit prospects if you're able to get back on track at the end of a payment holiday.
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 consider your bank account information, your use of credit products, or how much you are in debt, when making a lending decision.
If, after taking payment holidays of 6 months, your lender agrees that you can continue to temporarily defer payments, this may be reported to your credit file in accordance with normal reporting processes.
If your lender agrees to provide you with more support, they should tell you what this will mean for you and your credit file.
Coming to the end of a payment holiday
Your mortgage lender will contact you about what will happen when your payment holiday ends.
If, after taking payment holidays of 6 months, you continue to face difficulties paying your mortgage because of coronavirus, your lender should provide you with tailored support.
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’re not eligible for (or do not want) a payment holiday, your lender will provide tailored support that will take into account your individual circumstances. This will give you time to get back on track.
Your options could include:
- making no payments for a temporary period (this may be reported on your credit file)
- making reduced payments for a temporary period
- changing your mortgage term to make your payments more affordable
Your lender should be clear about what these options will mean for you, and what this support could mean for your credit file.
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 were struggling to make payments before the pandemic, if you’re in longer-term financial difficulty, or if you’re worried about how you will manage your payments and debts in the future.
If you’re claiming a benefit such as income-related Employment and Support Allowance, Income Support or Universal Credit, you might be able to claim help with your mortgage interest payments. Information on eligibility and how to claim is available from the Money Advice Service.
For more information on managing your money during and after the coronavirus pandemic, you can also use the Money Advice Service’s Money Navigator Tool.
Your home should not be repossessed before 31 January 2021 without your consent, unless there are other exceptional circumstances.
Your lender shouldn’t start repossession action unless all reasonable attempts to resolve the position have failed. But if you can’t agree a repayment plan, your lender may look to start court action to repossess your home.
Lenders can start repossession proceedings, seek a court hearing, and ask for a possession order before 31 January 2021. The court may also grant an order for possession.
However, a lender can’t take steps to enforce that order and repossess your home until 31 January 2021, unless you have agreed to the repossession or there are other exceptional circumstances.
If you’re facing repossession, find out where you can get free debt advice.
Financial implications if repossession is stopped
If a repossession on your home is stopped and you don’t keep up with payments, the total amount you owe will increase. This is because interest will continue to be charged (plus any fees and charges you may owe according to your lender’s tariff of charges). This means you are likely to get less back later if your property is repossessed and then sold by your lender.
If property prices fall in the time between now and when your property is sold, you might get less back, or even nothing, if your property is sold for less than you owe.
Your lender should make sure you are kept fully informed, and should discuss the potential consequences of suspending steps towards repossession.
They should explain the effect of staying in the property on any remaining equity, if the amount you owe is increasing or if the value of the property subsequently falls.
They should also tell you that, although the court may rule that the lender is entitled to possession of the property, they will not take any other steps to enforce this before 31 January 2021.
Contact your lender for more information about how this might affect you.
Lenders should consider the needs of customers who may be vulnerable.
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.
Coronavirus, and the measures introduced to help manage the pandemic, such as local restrictions, may affect personal circumstances in ways that could cause vulnerability.
Lenders should be aware that an individual’s circumstances could change quickly in a way that could make them vulnerable.
If you think you’re in circumstances that mean you’re vulnerable, it’s important to let your lender know when you contact them, so they can work out how best to support you.
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.