The Financial Conduct Authority has announced that lenders will have to provide borrowers with an additional three-month payment holiday in certain circumstances where the borrower’s finances have been adversely affected by a coronavirus. Since the scheme commenced in March, lenders have already offered 1.8 million payment holidays.
However, the FCA recognises that where customers can afford to make full payments, it is certainly in their interests to do so, as interest continues to accumulate during the payment holiday. Therefore, at the end of a payment holiday, firms should contact their customers to find out if they can resume payments. If the borrower is in a position to resume their repayments, firms should accede to this request, and agree to a plan on how the missed payments will be repaid.
Where borrowers have had a payment holiday, but remain in financial difficulty, lenders will now need to consider whether it is appropriate to offer a further three-month payment holiday.
Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. However, lenders will still be able to reject mortgage applications in the future when applicants may have taken a payment holiday during the coronavirus outbreak.
Lenders are welcome to provide additional forbearance over and above the new FCA requirements where they judge that this is appropriate. Examples of additional forbearance that a lender might consider include interest reductions and interest waivers.
The regulator also says that lenders should consider signposting customers towards sources of debt advice, especially if they are likely to be in longer-term financial difficulty.
Any borrower who has yet to ask for a payment holiday now has until October 31 2020 to request one. The ban on re-possessing any homes has also been extended until this date.
Finally, the FCA asks lenders to consider that many customers may not have access to digital banking services and may need to consider alternative arrangements to enable everyone to request payment holidays and access any other services they require.
Christopher Woolard, Interim Chief Executive at the FCA, said:
“Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.
“Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a payment holiday will continue to be able to apply until 31 October.”
John Glen MP, economic secretary to the Treasury, said:
“Everyone’s circumstances will be different, so when homeowners can pay some or all of their mortgage, they should work with their lender on a plan.
“But if they are still struggling, I want them to know that help is there.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.