Britain’s lenders are set to extend support to homeowners hardest-hit by the coronavirus crisis, but a watchdog has stopped short of ordering another round of three-month mortgage holidays.
The UK’s financial regulator is likely to order banks to let the worst-affected borrowers make reduced or no payments after many mortgage holidays run out at the end of October.
The Financial Conduct Authority (FCA) had told banks to hand struggling customers a three-month mortgage holiday when the pandemic hit, which was later extended by another three months.
Customers can continue to apply to defer payments for three months until 31 October. But the FCA has now set out how banks should help customers after that date, amid growing job losses as the furlough scheme is wound down and employers brace for a sustained downturn.
It is consulting banks and other lenders over draft guidance published on Wednesday, which says firms should “offer arrangements for no or reduced payments for a specified period” for those in need of further support.
The FCA said many customers will remain in financial difficulty later this year. Such help will be available to those newly in difficulty as well as those who have already received holidays.
But the FCA did not set out how much banks should reduce payments by or how long for in a press release announcing the draft guidance on Wednesday. It also said the majority of customers who had received payment holidays were expected to resume full payment.
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Christopher Woolard, interim chief executive of the FCA, said: “It is important that consumers who can afford to resume mortgage payments should do so. However, we understand that borrowers facing payment difficulties because of the pandemic will continue to face uncertainty and may also experience temporary interruptions in income.
“We are proposing that firms contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track. Firms should not take a ‘one size fits all’ approach.”