Data from trade association UK Finance shows a fall of more than 90% in the number of mortgage and loan deferrals that remain in force, since a peak in June of this year.

Mortgage deferrals peaked at 1.8 million, but only 162,000 are still in force – a fall of 91%, and the number of personal loan payment holidays has fallen 92% from a peak of 793,000 to 64,400. Credit card deferrals are down from 1.13 million to 97,300 – a drop of 91.4%. Across the three products, only 323,700 of the original 4.4 million deferrals remain active.

The fall is only to be expected, as the Financial Conduct Authority effectively compelled lenders earlier this year to offer a three-month payment deferral to any borrower who claimed that their finances had been adversely affected by coronavirus. However, the deadline for applying for these payment holidays ends on October 31, and the FCA now says lenders need to examine borrowers’ circumstances in detail and decide what forms of forbearance and support are appropriate, rather than automatically offering a payment deferral.

The FCA suggests that forbearance options lenders might offer to individual borrowers include:

  • Extending the term of the mortgage
  • Re-structuring the mortgage
  • Offering reduced payments for a period of time
  • Offering a period where the borrower does not have to make any payments
  • Referring the borrower to appropriate sources of advice and guidance

Any additional support a lender decides to offer would be reflected on the borrower’s credit report in the usual way. Lenders must make it clear to borrowers what the likely impact on their credit report is when they offer any forbearance.

Borrowers who are at the greatest risk of harm, or who are in severe financial difficulty, should be treated as priority customers by their lenders.

While the emphasis is no longer on offering automatic payment deferrals, it remains critical that lenders offer appropriate support, as more job losses are on the horizon with more areas of the UK set to move into the higher tiers of coronavirus restrictions and more workplaces forced to close. It has never been more critical for firms to be able to identify vulnerable customers and to respond appropriately to their needs.

Eric Leenders, managing director of personal finance at UK Finance, said:

“The banking and finance industry is providing unprecedented levels of support to help customers through the Covid-19 crisis.

We understand that many people’s finances will continue to be impacted by this pandemic and want to reassure them that ongoing help is available, tailored to their individual circumstances.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed by Scott Robert and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article