Banks and building societies have agreed to allow six month mortgage holidays up until 31st July, 2021, with the industry agreeing the move with the Financial Conduct Authority (FCA).

Lenders have committed to renewed support for mortgage customers facing financial difficulty as a result of the Covid-19 pandemic, as the Financial Conduct Authority (FCA) confirms an extension to the mortgage payment deferral scheme until 31st July 2021, with final applications due by 31st March 2021. The extension gives access to customers who have not yet sought support, or who have had a payment deferral of less than six months.

A total of 2.6 million mortgage payment deferrals have so far been granted since the start of the pandemic. Just under 140,000 were still in place at the end of October. Of those mortgage customers whose payment deferral has come to an end, evolving industry analysis suggests that over 80 per cent have now returned to making repayments.

Customers will now have until 31st March to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to no later than 31 July 2021. Customers who are newly impacted by coronavirus and who want to benefit from the maximum six months available should apply in good time before their February 2021 payment is due. The final guidance allows payment deferrals that are not consecutive, including for customers in arrears or receiving tailored support.

The FCA has clarified that this updated guidance applies retrospectively from 1 November 2020, coming fully in to force on 20 November 2020. If a customer came to the end of a payment deferral between 31 October and when this latest amended guidance comes into force, and have not had six months of payment deferrals, they will be eligible to apply for a retrospective payment deferral to cover this period.

Sheldon Mills, interim Executive Director of Strategy and Competition at the FCA said “Today we have confirmed further support for borrowers struggling financially as a result of coronavirus.”

“The announcement we have made today, ensures that the support offered through payment deferrals is as flexible and accessible as possible. This means borrowers will again be able to access payment deferrals up to a maximum of 6 months. However, if you are able to keep paying it will be in your best long-term interest to do so. Payment deferrals should only be taken when absolutely necessary.

“The FCA has also confirmed that no one should have their home repossessed without their agreement until after 31st January 2021.

Eric Leenders, Managing Director of Personal Finance at UK Finance, said “Lenders are continuing to provide unprecedented levels of support to help customers through the Covid-19 crisis, with over 2.6 million mortgage payment deferrals already granted. As the impact of the pandemic continues to be felt across the country, the banking and finance industry stands ready to deliver ongoing assistance to those in need.”

“All customers whose finances are impacted by the coronavirus will be eligible for a maximum of six months of payment deferrals on their mortgage. While it will always be in the long-term interest of customers who are able to do so to resume making payments, all lenders will be providing tailored support for anyone who is still struggling. There are a range of different ways to get in touch, including through online chat, social media and mobile and banking apps. As you will appreciate, phone lines are very busy at this time and we would encourage only those customers who are facing an immediate issue with their finances to call their provider in the first instance.”

Robin Fieth, Chief Executive of the Building Societies Association (BSA), said “Whilst the best advice is always to pay your mortgage if you are able to, anyone who is struggling to do this could benefit from the extension to the mortgage payment deferral scheme or other tailored support that is available from lenders. It’s important that customers discuss their situation with their lender as soon as they become concerned, and before they miss a mortgage payment. Lenders will do everything in their power to help borrowers in financial difficulty at this challenging time – keeping people in their homes is the objective.”

“The FCA has been in listening mode throughout the pandemic and their final guidance includes industry suggestions, specifically the ability to top up to six months even if a borrower has had two shorter deferral periods already and not excluding borrowers who have missed a payment after a deferral period from the scheme.”

Commenting on the announcement, Head of Policy at StepChange, Peter Tutton, said “Applications can be made until March 31. Borrowers who have used up their six-month allowance can apply for “tailored support” such as reduced payments.”

“The extension of payment deferrals for mortgage borrowers will come as a welcome relief to those who have yet to take full advantage of the scheme and are in difficulty due to ongoing coronavirus restrictions. We strongly echo the FCA’s recommendation that consumers should keep up with payments on their mortgage if they can afford to do so and should only seek support where such support is absolutely necessary.”

“Our main concerns are for those whose payment deferrals have come to an end and are unable to resume repayments, as their only option will be whatever their lender offers. Some people may feel under pressure to resume payments due to concerns about negative credit reporting and use credit to do so, which could lead to more serious problems later down the line. Aside from more consistent forbearance from different lenders, there is a need for Government to consider how the underlying mortgage safety net can be strengthened, given the long tail of payment problems likely to arise from unemployment.”