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 can afford to repay your mortgage, it is in your interest to do so, as interest will build during that period and you will need to pay back more later. Your monthly repayments after the payment holiday may also be higher, or your mortgage may take longer to repay.
However, if you are struggling to make your mortgage repayments because of coronavirus, we have confirmed new measures to help you.
From 4 June 2020, these measures will:
- provide you with options when your current payment holiday comes to an end to ensure that you continue to get support if you need it
- ensure that if you have not yet had a payment holiday, but need one, you can still have one
- extend the current ban on repossessions to 31 October 2020
Read our guidance to find out more about:
- payment holidays
- coming to the end of a payment holiday
- how repossessions will be affected
- vulnerable consumers
- firms this guidance applies to
A ‘payment holiday’ is a period of time, agreed with your lender, when you do not have to make mortgage payments. A ‘partial payment holiday’ is where your lender lets you make reduced payments.
Payment holidays are designed to help you if you are finding it hard to make payments – in this case because of coronavirus.
If you have not yet taken a mortgage payment holiday, you have until 31 October 2020 to apply for one. Both a payment holiday and a partial payment holiday are temporary and you will still have to pay back the outstanding amount at a later date.
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 are 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 is in your interest to do so.
- It is 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 makes clear to firms that they should ensure that if you take a payment holiday it will not have a negative impact on your credit file.
However, there are other ways lenders can tell whether you have taken a mortgage payment holiday, which could impact future lending decisions.
Lenders may take into account other information when making lending decisions, including information provided by you or bank account information, for example.
If you’re already behind with mortgage payments
We expect lenders to offer payment holidays to borrowers who are experiencing payment difficulties because of circumstances related to the coronavirus.
If you have not yet taken a payment holiday but are already behind on your repayments, you can still apply for a payment holiday and you will get the support you need.
However, if you take a payment holiday, interest on any payments that you do not make will continue to increase during this time, so it is important to choose the option that is right for you and your financial situation.
Our proposals do not stop mortgage lenders from providing other forms of assistance, so other options available to you may include your lender reducing or waiving interest.
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 are thinking of taking a payment holiday for the first time, you should contact your lender as soon as you become aware that you may struggle to make your next payment.
To make sure that your lender is able to answer all questions, before calling:
- Ask yourself: Do I need to speak to my mortgage lender today?
- Consider: Can I do this through mobile online banking?
- Review: Is the answer already on my lender’s website?
If you took a payment holiday under our previous guidance, your mortgage lender will communicate with you about what happens when your payment holiday expires.
Depending on your circumstances, your options will include:
- If you can start repaying your mortgage again, you should start to make repayments because it is in your best interest 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, then your mortgage lender will work with you to find out what you can afford to pay back. They will reduce your repayments to the amount that you both agree on for a further 3 months.
- If you cannot afford to make any repayments then you will get more support and firms will consider a further 3-month payment holiday.
Both a payment holiday and a partial payment holiday are temporary and you will still have to pay back the outstanding amount at a later date.
Interest will also continue to build during this time and your repayments may be higher after the payment holiday.
Any of the payment holiday options above should not have a negative impact on your credit file. However, remember that there are other ways lenders will be able to tell if you took a payment holiday, which could impact future lending decisions.
If your lender offers you an alternative option that could have a negative impact on your credit file, they should warn you about this.
If you were already finding it hard to make payments
If you were already behind on your repayments before taking a payment holiday under our previous guidance, other options may be more suitable for you.
Interest on any payments that you do not make during a payment holiday will continue to increase, so it is important you are offered an option that is right for you and your financial situation.
Our proposals do not stop mortgage lenders from providing other forms of assistance, such as reducing or waiving interest. Contact your lender to see what’s possible.
Working with your mortgage lender
Before agreeing to give you another payment holiday, your mortgage lender should provide you with enough information and assistance, which may include directing you to online tools, so you can make an informed decision.
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.
It is 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.
Depending on your situation, you may also want to talk about coming to a longer-term arrangement with your mortgage lender, if you can’t currently restart your monthly payments.
Other options may include changing the terms of your mortgage or switching to an interest-only mortgage.
Where to find help managing money and debt
We have provided some information that lenders can give you to help you manage money and debt if you have been affected by the coronavirus pandemic.
This information might be helpful to you if you already had payment difficulties and may be in longer-term financial difficulty. Or, if you are worried about how you will manage your payments and debts in the future.
Other payment freezes
These measures apply to mortgages. They do not apply to consumer credit products, such as credit cards and loans. Consumer credit products are covered by separate guidance that will be updated in due course and may be different from the guidance for mortgage payment holidays.
During this time of uncertainty and upheaval, people should not be at risk of losing their homes. We expect lenders to stop repossession action until 31 October 2020.
This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by coronavirus.
However, you may choose for your home to be repossessed if you believe it’s in your best interest – for example, because you’ve already made plans for alternate accommodation. If this is the 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 because 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 at a later date 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 what you owe.
Contact your lender for more information on how this might affect you.
If you do not want repossession to be stopped, contact your lender immediately.
Your mortgage lender should consider the needs of vulnerable customers when carrying out these measures.
Circumstances that can cause a consumer 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 consumers, who would not normally think of themselves as vulnerable, to suddenly face personal circumstances that can cause vulnerability.
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 adopt this guidance on a voluntary basis 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.