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Coronavirus: UK homeowners can apply for another mortgage holiday

Tom Belger
Finance and policy reporter
Homes in Leverstock Green, near Hemel Hempstead. (Steve Parsons/PA)

Britain’s lenders have been ordered to offer homeowners a second wave of mortgage holidays if they are struggling to pay because of the coronavirus crisis.

A UK financial watchdog said borrowers would be able to apply for either a new or extended mortgage holiday until 31 October. The announcement marks a confirmation of plans first floated in May, and has sparked calls for an extension of similar measures to help renters.

The latest data from leading lenders shows at least 1.82 million three-month holidays have already been granted, meaning one in six mortgages is not currently being repaid. These borrowers will be able to see another three-month holiday, while the deadline has been extended for new applications.

The Financial Conduct Authority (FCA) also announced an extension of its ban on repossessions to the end of October. It said the move would “ensure people are able to comply with the government’s policy to self-isolate if they need to.”

READ MORE: Coronavirus sparks biggest monthly fall in UK house prices since 2009

It said firms would contact customers directly about what happens when existing payment holidays end, and should offer “a range of options” for how missed payments will be made up if customers are able to start doing so. If not, the FCA said firms should find out what borrowers can afford, and should “offer further support” that could include another holiday for customers in financial difficulty.

The FCA also said the further coronavirus-linked payment holidays would have no negative impact on customers’ credit files. “However, consumers should remember that lenders may use information obtained from other sources, such as bank account information, in their lending decisions,” it said in a statement on Tuesday.

The guidance about the FCA’s interpretation of its rules comes into force from 4 June, and only applies to mortgage borrowing. Separate new guidance exists on lending such as car finance and credit card loans, and the watchdog said this would be “updated in due course.”

READ MORE: UK property market reopens as viewings and valuations allowed

The decision to leave credit ratings intact is likely to be welcomed by borrowers, but has proved controversial with lenders.

Joe Garner, chief executive of Nationwide building society, told the BBC last week he disagreed with such a move. He warned struggling borrowers “could go out and take further and further loans, which would not be in their interest.”

He added that there should be no “big black mark” on a credit file, but instead a “middle way” with a temporary notice until borrowers’ payments return to normal. He said this should not affect their ability to remortgage.

Meanwhile pressure is mounting on the government over support for renters, with a current ban on new eviction proceedings due to expire in three weeks.

Gillian Guy, chief executive of Citizens Advice, welcomed the support for homeowners, but warned private renters were at risking of losing their homes. She said the charity’s research suggested 2.6 million tenants had missed or expected to miss payments over the pandemic.

“There can’t be one rule for renters and another for homeowners. The government has pledged that no renter would be forced out of their home because of coronavirus. Time is running out for them to fulfill that promise.”