We have issued guidance on how we expect mortgage lenders and administrators to treat customers during this coronavirus (Covid-19) situation. Read more about the steps we’ve taken to support you.
If you can afford to start repaying your mortgage again, it is in your interest to do so. But if you are struggling (or may struggle in the future) to make your mortgage repayments because of coronavirus, we have outlined some key ways your lender can help.
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A ‘payment holiday’ means you agree with your lender that you will not have to make mortgage payments for a set amount of time. A ‘partial payment holiday’ is where your lender lets you make reduced payments.
Payment holidays are designed to help you when you may experience payment difficulties – in this case because of the coronavirus situation.
It is important to remember that you still owe the amounts that you don't pay as a result of the payment holiday. Interest will continue to be charged on the amount you owe.
This means that, at the end of the payment holiday, you will have to make up the missed payments. There will be various options for doing this, for example by increasing your monthly payments slightly, or by adding a short extension to your term. Your lender will be able to explain to you what options it offers.
Applying for a payment holiday
You should contact your lender if you are experiencing or reasonably expect to experience payment difficulties because of circumstances related to coronavirus.
What to do with direct debits
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 may impact your ability to remortgage.
Interest on your mortgage during the payment holiday
You will still be charged interest during the payment holiday, unless your lender has told you otherwise.
When the payment holiday ends
We have proposed further measures to support customers who are struggling to pay their mortgage due to coronavirus.
These include options for when the current mortgage holiday comes to an end.
Your credit file
Our guidance makes clear to firms that they should ensure that taking a payment holiday will not have a negative impact on your credit file.
However, there are other ways lenders can tell whether you have taken a mortgage holiday, which could impact future creditworthiness assessments.
Agreeing the payment holiday
We expect lenders to offer payment holidays to borrowers who are experiencing or reasonably expect to experience payment difficulties because of coronavirus, unless they consider another option is better suited and in your best interest. Many lenders have already committed to this.
Your lender may also offer other options if they are more appropriate for your circumstances, and where it is in your interest. You can discuss these with your lender.
You should not apply for a mortgage payment holiday if you are not experiencing or do not reasonably expect to experience payment difficulties.
If you are behind with your mortgage payments.
We expect lenders to offer payment holidays to borrowers who are experiencing or reasonably expect to experience payment difficulties because of circumstances related to the coronavirus, or another option better suited to your needs and in your best interest, whether or not you are already behind on your payments.
How long do I have to apply for a mortgage holiday?
If you are experiencing or reasonably expect to experience payment difficulties and may need a payment holiday, you should speak to your lender in good time before the next payment is due. Please be considerate of others when contacting your lender and allow those with much closer dates into the queue first.
You can apply for a payment holiday at any time before this guidance is reviewed in 3 months. The payment holiday will not start, however, until it has been agreed with your lender.
Contacting your lender at this time
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.
You should speak to your lender in good time before the next payment is due.
- 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?
Lenders are temporarily stopping repossession actions
During this current period of unprecedented uncertainty and upheaval we do not think people should be at risk of losing their homes. We therefore expect lenders to stop repossession action. This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by coronavirus.
If you already have a repossession order on your home
We would not expect the lender to go ahead with the repossession, unless you want them to. Please contact it to discuss your situation.
Choosing for your home to be repossessed
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 so that it knows this.
Interest during this period
You will continue to be charged interest on the amount you owe, plus any fees and charges you owe according to your lender’s tariff of charges.
Financial implications if repossession is stopped
The amount you owe will increase because interest will continue to be charged. This means that you are likely to get less back if and when your property is repossessed and then sold by your lender.
If property prices go down between now and the time your property is sold then you might get even less back, or nothing if your property is sold for less than you owe.
Your lender will be able to give you more information on how this affects you.
If you do not want repossession to be stopped, contact your lender immediately.
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 (and technically out of scope of our guidance) which 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.
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.
On 22 May 2020, we proposed new measures to support customers who are struggling to repay their mortgage due to coronavirus.
If confirmed, 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 and need one, you can still have one
- extend the current ban on repossessions to 31 October 2020
If you can afford to start repaying your mortgage again, it is in your best interest to do so.
We have invited stakeholders to comment on these proposals by 5pm on Tuesday 26 May. We expect to finalise the guidance by the first week of June, with it coming into force shortly afterwards.
What to expect
If these measures are agreed, your mortgage lender will contact you when you are nearing the end of your payment holiday to find out if you can afford to start repaying your mortgage again.
Depending on your circumstances, the options will be:
- if you can afford to start repaying your mortgage again, it is in your best interest to do so
- if you cannot afford to start repaying your mortgage, in part or in full, as a result of circumstances relating to coronavirus, then your mortgage lender will work with you to find out what you can afford and will reduce repayments to that amount for a further 3 months
- if you cannot afford to make any repayments as a result of circumstances relating to coronavirus, then you will get further support. As part of this, firms should consider a further 3-month payment holiday
If you haven’t already taken a mortgage holiday and you are facing temporary payment difficulties due to coronavirus, we are proposing that you can still apply for one until 31 October.
If you were already having payment difficulties before the coronavirus measures were put in place, you should speak to your lender about the options available to you.
Working with your mortgage lender
Before agreeing a payment holiday with you, your mortgage lender will, under our proposals, have to provide you with enough information so you can make an informed decision.
They should explain to you that taking another mortgage holiday, or reducing monthly repayments, is likely to increase the amount you pay in the longer term.
It is important to be as open and honest as possible 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.
For instance, it may be in your interests to extend the term of your mortgage. Or you may want to consider switching to an interest only mortgage.
Given the uncertainty and upheaval consumers are facing, we have proposed that lenders should not start or continue repossession activities against customers before 31 October.
As before, this applies to all mortgage borrowers at risk of repossession, whether or not your income is affected by coronavirus.
Impact on your credit file
Taking another full or partial mortgage holiday under our guidance should not have a negative impact on your credit file.
However, lenders may take into account other information when making lending decisions, including information provided by you or bank account information for example. This means that there are other ways lenders can tell whether you have taken a mortgage holiday, which could impact future creditworthiness assessments.
Help managing money and debt
As part of our proposals, 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 particularly helpful to you if you already had payment difficulties and are likely to be in longer-term financial difficulty, or if you are worried about how you will manage your payments and debts in the future.
Our proposals do not stop mortgage lenders from providing other forms of assistance, such as reducing or waving interest.
This guidance only applies to mortgages. It does not apply to consumer credit products which are covered by separate guidance, which will be updated in due course. As the products vary in nature, so might our approach.
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
- 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, as well as 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.