UK markets open in 5 hours 53 minutes

Coronavirus: UK homeowners given another three-month mortgage holiday

Tom Belger
Finance and policy reporter
Homes in Birmingham as UK mortgage borrowers receive an extension to potential mortgage holidays. Photo: Mike Kemp/In Pictures via Getty Images

A UK government watchdog is ordering mortgage lenders to offer another three-month payment holiday to homeowners in financial trouble because of the coronavirus.

Borrowers who have already had three months’ payments deferred will be able to extend the holiday, and the application deadline for those who have not has been extended to 31 October.

Meanwhile the Financial Conduct Authority (FCA) also extended a ban on repossessions to the end of October, “keeping a roof over people’s head during a public health crisis.”

But the FCA said it expected customers able to afford to return to full repayments to do so, agreeing a plan with lenders over how missed payments will be repaid.

More than 1.6 million mortgage payment holidays had been granted by the end of April, accounting for one in seven borrowers.

READ MORE: UK house price growth slowed even before lockdown

Lenders are expected to “engage with their customers and find out what they can repay” when borrowers come to the end of current mortgage holidays. They are then expected to offer further support to “those who remain in temporary financial difficulty,” and consider an extension of the three-month holiday.

Christopher Woolard, interim chief executive of 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.”

The FCA also said such full and partial payment holidays should not have a negative impact on credit files.

But it added in a press release on Friday: “Consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.”

READ MORE: Mortgage arrears edge higher and house prices ‘may take a year’ to recover

It comes as pressure grows on the government to extend similar help to renters. New evictions of tenants were suspended in March, and landlords urged to renegotiate rents for tenants in trouble. But fears are growing of a spike in evictions once the ban ends, and landlords are not legally obliged to offer tenants rent reductions or holidays.

Polly Neate, chief executive of Shelter, said on Thursday: “If the government lifts the eviction ban without putting in protections for renters, it will unleash a wave of homelessness that will see councils drown and families needlessly suffer.”