The Financial Conduct Authority (FCA) has confirmed the support mortgage borrowers will receive if they continue to face payment difficulties due to coronavirus.
The FCA has published additional guidance for firms, to ensure that consumers who have benefitted from payment deferrals under the current guidance who still face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends, continue to get the support they need.
The measures mean firms will offer further short and longer-term support reflecting the circumstances of their customers. This could include extending the repayment term or restructuring of the mortgage. Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track. This additional guidance will come into force on 16 September 2020.
Christopher Woolard, Interim Chief Executive at the FCA, said “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. Consumers in these situations will benefit from firms providing them with tailored support.”
“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”
Under the guidance published today, firms will prioritise support for borrowers who are at most risk of harm, or who face the greatest financial difficulties. The new guidance reinforces the need for firms to deliver outcomes that are right for individual borrowers rather than adopting “one size fits all” solutions. The FCA will be monitoring firms to ensure borrowers are treated fairly having regard to their individual circumstances.
Firms will also signpost borrowers to the support they need in managing their finances, including through self-help and money guidance, or refer borrowers to organisations that can provide free debt advice if this meets their needs and circumstances.
Where borrowers have taken, or are taking, payment deferrals under our existing guidance and require further support from lenders these further arrangements can be reflected on credit files in accordance with normal reporting processes. This also applies to borrowers newly affected by coronavirus who receive support from their lender after 31 October. This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.
The FCA’s current guidance published in June will continue to provide support for those impacted by coronavirus until 31st October 2020 – with consumers able to take a first or second three-month payment deferral until this date. The June guidance is due to expire on 31 October and we do not intend to extend this guidance. The guidance published today ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or they are newly affected by coronavirus after 31st October. However, we will keep the guidance under review and if circumstances change significantly, consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic.
Eric Leenders, Managing Director of Personal Finance at UK Finance, said “The banking and finance industry is committed to providing ongoing support to those facing financial difficulty as part of our clear plan to get the country through this crisis.”
“Lenders understand that many households will continue to see their finances squeezed as the pandemic continues and will be offering a range of support for those who need it. It is essential that customers speak with their lender to discuss the best solution for them.
“Firms will be communicating with customers whose mortgage payment deferral is coming to an end to discuss the options available. Those who can afford to resume payments should do so, as it will always be in their best interests in the long run.”
Fiona Hoyle, Head of Consumer and Mortgage Finance at the FLA said “With most parts of the economy now open for business and more consumers able to resume their usual mortgage payments, the flexibility set out for lenders today is welcome indeed.”
“There will certainly be people who will require ongoing support, but lenders can now prioritise these customers and offer solutions specific to their circumstances.”
Richard Lane, Director of External Affairs at StepChange, said “We agree entirely with the FCA’s assessment that many customers will continue to need ongoing support and forbearance beyond the previously agreed payment holidays. We are not out of the woods in terms of people’s vulnerability to financial difficulty arising from the pandemic – such as job losses that haven’t even happened yet. Public support needs to complement regulatory support; now would be a good time to consider restoring support for mortgage interest back to its previous status as a benefit rather than a loan.”
“It’s never been more important for firms to remember that repossession should only ever be a last resort. At StepChange, home-owners who need debt advice are able to access not just our normal debt advice service, but also our specialist mortgage debt advice team. This means that all possible options to resolve their debt situation can be explored, including whether remortgaging or equity release may be an appropriate strategy for certain households.”
Gareth Shaw, Head of Money at Which?, said “While the FCA has announced some support for certain customers who will struggle financially after the current support period ends, it is disappointing that payment deferrals will no longer be available in the same way.”
“We are also concerned about the impact of allowing normal credit reference agency reporting to resume even where consumers fall into temporary difficulty. It is unfair that consumers who have not yet had a deferral but may need support after the furlough scheme ends will feel the effects longer-term.”
“Lenders should ensure that people can easily access the support they need and not shy away from offering a range of support options. They must be clear with customers about how any arrangements, such as payment deferrals, will be marked on their credit file.”