Mortgage holidays to be extended for up to six months amid England lockdown

UK homeowners are set to get up to six months mortgage holiday extension as England enters a second lockdown from 5 November to 2 December.

On Saturday, UK prime minister Boris Johnson revealed a host of new measures aimed at curtailing the rising number of COVID-19 infections.

In a dramatic U-turn Johnson, who was accompanied by England's chief medical officer professor Chris Whitty and the government's chief scientific adviser Sir Patrick Vallance announced that England will officially enter a month-long lockdown.

The measures mean that pubs, cafes and restaurants will shut, except for takeaway and delivery services, from 5 November to 2 December. Schools and colleges will remain open.

It comes after, Britain reached a grim milestone as the total number of coronavirus cases since the pandemic began hit 1,011,660 on Saturday.

Following the new lockdown, the Treasury announced on Saturday borrowers will be able to top their mortgage payment holiday to up to six months without this being recorded on their credit file.

In response to the news, the Financial Conduct Authority (FCA) said that it will propose updates on Monday 2 November, to its guidance on supporting mortgage borrowers.

FCA said it is also considering the implications for consumer credit, which includes products such as overdrafts, personal loans and credit cards.

To help those financially affected by COVID-19, the FCA will propose that mortgage borrowers who have not yet had a payment holiday can request one — potentially for up to six months.

Under the proposals, customers who already have a payment deferral for a period of less than six months would be able to extend that deferral. Meaning mortgage borrowers would be able to have a payment holiday for a maximum of six months.

READ MORE: Coronavirus: England goes into second lockdown for one month

Previously, borrowers were told to apply for a mortgage payment holiday by 31 October as the scheme was due to come to an end on Saturday.

It has been extended multiple times since being introduced by UK chancellor Rishi Sunak in March.

After this date, lenders would provide more tailored support, which could have been reflected on borrowers’ credit files, the FCA previously said. Tailored support, which depends on customers’ circumstances, could include deferring payment of the interest or the sums due, extending the mortgage term or switching temporarily to interest-only payments.

The regulator has said that it will work with trade bodies and lenders on how to implement new guidance swiftly. In the meantime it urges borrowers not to contact lenders yet as they will provide information on the changes for customers.

It added that borrowers who have already had a six-month payment deferral and are still experiencing payment difficulties should speak to their lender to agree tailored support.

Watch: Boris Johnson orders national lockdown for England

FCA advises homeowners to not take a payment holiday unless they need it as taking a payment holiday can cost more in the long run as interest will still build up and loans will need to be paid off.

Eric Leenders, the managing director of Personal Finance at UK Finance, said that lenders “stand ready to deliver ongoing [COVID-19] assistance to those in need.”

“The industry is working closely with the FCA to ensure customers impacted by the new lockdown measures announced this evening will be able to access the most appropriate support. Customers seeking to access this support do not need to contact their lenders yet,” Leenders said.

He added that “further information” would be provided after the FCA’s announcement on 2 November.

Responding to FCA’s announcement, Robin Fieth, chief executive of the Building Societies Association (BSA), said: “Building societies and credit unions recognise the financial pressures on some households and will continue to work hard to support customers in the coming months, working closely with the FCA.”

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Consumer group Which? has urged lenders to “take a proactive approach” to ensure there is “adequate support available” for people who need it. Which? also called for the FCA to be “ready to intervene if there is any indication that customers are not getting the support they need quickly enough.”

Head of Money at Which?, Gareth Shaw, said: “Our research has shown many people are struggling financially and there has been a significant increase in consumers defaulting on loan or credit card payments.

“With new restrictions set to be imposed next week, it is right the government has extended some financial support measures including the furlough scheme and mortgage holidays, and confirmed mortgage deferrals won’t impact credit files.

“We’d also urge the regulator to follow suit and consider extending vital support measures across other credit products.”

Recent figures from UK Finance reveal around 162,000 mortgage payment holidays are in place, down from a peak of 1.8 million in June.

Additionally, a further 97,300 payment deferrals are in place on credit cards and 64,400 on personal loans.

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