UK Finance has announced that over 1.6 million mortgage payment holidays have been offered to homeowners impacted by Covid-19. This means that one in seven mortgages in the UK are now subject to a payment holiday.
For the average mortgage holder, the payment holiday amounts to £755 per month of suspended payments.
Lenders continue to offer product transfers enabling existing customers who come to the end of a fixed term product, and meet eligibility criteria, to move to a new deal. Further to the industry agreement announced in July 2018, the industry today also announces additional help for homeowners on payment holidays or for those who have been furloughed. Normally customers on payment holidays would not qualify for a product transfer, but given the current exceptional circumstances lenders are waiving this rule to help borrowers impacted by Covid-19. Product transfers are for like-for-like mortgages and tend not to require a new affordability assessment, meaning existing borrowers who have been furloughed will also be eligible.
More than 1.2 million mortgage payment holidays were approved in the first three weeks of the scheme, and hundreds of thousands more customers have been granted payment holidays in the last fortnight by lenders helping mortgage holders affected by the coronavirus. Over one third of all payment holidays approved so far were done so between 25 March and 1 April, as lenders worked with customers quickly after the scheme was announced to ensure homeowners impacted by Covid-19 received the support they need.
Commenting, Stephen Jones, UK Finance CEO, said “Lenders understand that many households are seeing their finances squeezed due to the coronavirus pandemic and we are working hard to help customers get through these tough times.”
“The industry has acted quickly to support homeowners through this crisis and has taken decisive steps to ensure that eligible customers on payment holidays due to Covid-19 can opt for the security of fixing their monthly mortgage payments going forward.”
“There is a range of support available to mortgage holders concerned about their finances. We would encourage any homeowners impacted by coronavirus to visit their lender’s website in the first instance to find out more information and how to apply.”
Robin Fieth, Chief Executive of the Building Societies Association (BSA) said “The Covid-19 situation means that right now times are far from normal and many households are worried about their finances. Lenders are working hard to help in a range of ways and it is right that this now includes the ability for those on a three-month payment holiday to be able to switch onto a new product with their existing lender at the end of a fixed term product should the two events coincide.”
Kate Davies, Executive Director of the Intermediary Mortgage Lenders Association (IMLA), said “This agreement builds on the commitment made by lenders in July 2018 to contact customers who are coming to the end of a mortgage deal and discuss what alternative options might be available.”
“It offers additional – and no doubt welcome – reassurance that customers will not be penalised if they have sought an approved payment holiday during this difficult period.”
Mortgage borrowers whose financial situation has been affected by Covid-19 are advised to contact their lender to discuss whether they are eligible for a mortgage payment holiday and if it is the best option for them. A payment holiday may not be the right choice for everyone, and customers should only apply if they need one. Those requiring this support will need to self-certify that their income has been either directly or indirectly impacted by the coronavirus.
Many lenders are offering customers the option to apply for a mortgage payment holiday through an online form on their website, as telephone lines remain extremely busy. Lenders are also urging mortgage holders not to cancel their direct debits before a payment holiday has been agreed, as this will be counted as a missed payment and could impact their credit file.
“Firms must now ensure those in need of assistance get clear information about the support that is on offer. It’s vital that the process is straightforward, so that consumers can easily access it in these challenging times.”