Mortgage lenders should not be considering home repossessions as an appropriate measure at this time, the City regulator has said.
The Financial Conduct Authority (FCA) expects lenders to stop repossession action. This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by coronavirus.
It said on its website: “During this current period of unprecedented uncertainty and upheaval we do not think people should be at risk of losing their homes.”
Repossession should not be commenced – or continued with – unless the firm can demonstrate clearly that the customer has agreed it is in their best interest.
The FCA also said that lenders offering payment holidays to home owners affected by coronavirus must not add on extra charges, apart from interest.
Lenders have already said they will offer three-month payment holidays, if appropriate, for mortgage customers whose finances are affected by coronavirus.
Setting out new guidance on its expectations of lenders, the FCA said firms should ensure that there is no additional fee or charge other than additional interest as a result of the payment holiday.
Borrowers taking payment holidays will still be charged interest during the period, unless their lender has told them otherwise, the regulator said.
The FCA guidance also makes clear to firms that they should ensure that taking a payment holiday will not impact the customer’s credit score.
FCA interim chief executive, Christopher Woolard said: “We want to help firms support consumers during these unprecedented times.
“Our mortgage guidance underpins the actions taken by mortgage providers and will give confidence to both consumers and firms. In particular, we are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time.”
Trade association UK Finance placed information on its website earlier this week which said lenders would “stay” repossession proceedings for 90 days.
This means lenders will suspend repossession orders and will not start court action, including putting the case to court or instructing on matters.
UK Finance said earlier this week that lenders could still make customers aware of the money they owe and informed that the case may eventually go to repossession proceedings.