PS20/11: Removing barriers to intra-group switching and helping borrowers with maturing interest-only and part-and-part mortgages

Open consultation: CP20/13
28/07/2020
Consultation closes
08/09/2020
Policy statement and Handbook rules
23/10/2020
23/10/2020
Temporary coronavirus guidance ends
31/10/2021

In October 2020 we amended our rules to help some borrowers in closed mortgage books to have more options. We also issued some new temporary guidance to help some borrowers with maturing interest-only and part-and part mortgages who are affected by the conditions created by coronavirus (Covid-19).

8 September 2021 update

The temporary guidance on maturing interest-only and part-and-part mortgages in PS20/11 will expire on 31 October 2021 and we do not intend to extend it. We have updated the information below to reflect this. 

Read PS 20/11 (PDF)

Update on helping borrowers with maturing interest-only and part-and-part mortgages

We issued temporary guidance on maturing interest-only and part-and-part mortgages in PS20/11. This came into force on 31 October 2020. The guidance allowed borrowers with an interest-only or part-and-part mortgage due to mature between 20 March 2020 and 31 October 2021 to delay repayment of their capital until 31 October 2021. This was subject to being up to date with their payments and maintaining their monthly interest payment.

This temporary guidance was a short-to-medium term coronavirus (Covid-19) measure to provide support to borrowers whose repayment strategy may have been affected by the pandemic. It supported our objective of securing an appropriate degree of protection for borrowers, in the particular circumstances of the pandemic, by building on Principle 6 (‘a firm must pay due regard to the interests of its customers and treat them fairly’). 

The guidance expires on 31 October 2021 and having reviewed market conditions we do not intend to extend it. The harms the guidance was designed to protect against have not materialised to the extent originally thought possible. So we do not think it is in borrowers’ interests to extend the temporary guidance. For example, increasing house prices mean that borrowers will not have to sell their property at a depressed value to repay their capital. Borrowers will gain from repaying the capital balance as expected, if they can, as this will save them the additional monthly interest costs of delaying repayment. We will keep market conditions and the need for further interventions under review.

What should consumers and firms do now?

Borrowers who have benefited from the guidance should aim to repay their capital as soon as possible. If they are concerned that they cannot do this within the timeframe agreed they should contact their lender. Firms may want to contact borrowers who delayed the repayment of their capital to discuss their position and how they plan to make the repayment, supporting them in line with our previous guidance.

Other Support

Some borrowers will still be in financial difficulty as a result of the pandemic and they remain a priority for us. Our tailored support guidance sets out how we expect firms  to treat borrowers in those circumstances.

We remain committed to playing our part in supporting mortgage prisoners. We have previously introduced interventions (the Modified Affordability Assessment and Intra-group switching) designed to remove regulatory barriers to switching for these consumers. We are currently updating our data on the characteristics of mortgage prisoners and reviewing the effect of these interventions as set out in the terms of reference for our Mortgage Prisoner Review.

Page updates

08/09/2021: Information changed Update on the expiration of temporary coronavirus (Covid-19) guidance