What next for mortgage payment holidays?

Following this morning’s HM Treasury announcement on support for mortgage borrowers, now is a good opportunity to clarify exactly what this means for borrowers.

Following this morning’s HM Treasury announcement on support for mortgage borrowers, now is a good opportunity to clarify exactly what this means for borrowers.

A window of opportunity?

Borrowers who have not yet taken a mortgage payment holiday but feel they now need one have until 31 October to apply by contacting their lender.

Those who have already taken a payment holiday and want to explore extending it due to covid-19-related financial difficulty should also contact their lender.

This is not a blanket nor automatic extension of payment holidays - and with good reason. A recent survey revealed that 70% of those currently on mortgage payment holidays feel confident they can pay their mortgage once the 3-month period comes to an end, which is encouraging news. If a borrower can pay their mortgage then we’d encourage them to do so.

It is crucial that borrowers don’t interpret a payment holiday as ‘free money’, it is a payment deferral. All repayments – and the interest accrued over the holiday period – will need to be paid by the end of the mortgage term. This could be achieved by amongst other things, adding the holiday period onto the end of the existing mortgage term (e.g. 25 years + 3 months), by recalculating the monthly repayment amount to factor in the deferred payments, or by payment of a lump sum post-holiday.

Support needs to be tailored to be effective

Support is available for those who feel less confident in their ability to meet repayments after 3 months and at any time after that too. For many borrowers in this position, a ‘blind’ extension could exacerbate financial difficulties and simply kick the problem further down the road.  A personalised approach is needed.

There will be no ‘cliff edge’ moment at the end of borrowers’ existing payment holiday. Lenders have an arsenal of tools which can be tailored to support an individual’s needs. A payment holiday is just one of these tools, and it’s not necessarily the best fit for all borrowers.

None of us want to see borrowers getting into deeper or unsustainable levels of debt, which is why we encourage borrowers with any concerns to contact their lender to explore the widest range of options available.  The earlier someone gets in touch, the easier it will then be to work out a suitable solution for their particular circumstances.

Repossession

It is important to reinforce that possession is always an absolute last resort for lenders. With the extension of the repossessions moratorium, homeowners should feel reassured that they are secure in their own homes.

Wide-scale payment holidays were a great tool in overcoming the initial peak of the pandemic. Over 90% of homeowners who have taken a payment holiday said that they found it helpful in navigating the financial challenges brought on by the coronavirus.

Now it’s about moving forward from the peak, but with a more bespoke and responsive approach that our sector will continue to deliver – just as it has done for almost 250 years.

 

Further reading

Report - What next for mortgage payment holidays? The views of borrowers

Brochure – Can’t pay your mortgage? Help is at hand

You may also be interested in...

BSA Card
  • BSA.Event Event
  • Audit & Taxation

Risk, regulatory, audit and accounting seminar

After a successful in-person event in 2024, and responding to delegate feedback, this year's annual update will once again take place in Birmingham. ...

BSA Card
  • BSA.Event Event
  • Audit & Taxation

What Labour’s Autumn 2025 Budget means for financial services

A free webinar hosted by BSA Associate, MHA With Chancellor Rachel Reeves set to unveil Labour’s Autumn 2025 Budget in November, this promises to b...

BSA Card
  • BSA.Event Event
  • Mortgages & Housing

Shaping the Future of the Mortgage Market: Insights on DP25/2

Join PwC and the Building Societies Association for a timely discussion on the FCA’s recent Future of the Mortgage Market discussion paper (DP25/2). ...

BSA Card
  • BSA.IndustryResponse Industry Response
  • Conduct Risk & Regulation

BSA responds to FCA CP25/17 - Targeted Support

The BSA welcomes the opportunity to respond to this consultation, which gives a use case of consumers with significant savings held in cash, and some ...

BSA Card
  • BSA.Event Event
  • Audit & Taxation

HMRC 3rd party data reporting requirements

A free webinar hosted by BSA Associate, PwC We will provide an update on the 3rd party data consultation that was announced in the Spring Statement...

BSA Card
  • BSA.Event Event
  • Mortgages & Housing

Annual meet-up for mortgage professionals

The 2025 Annual Mortgage Meet-up will be taking place in London on Thursday 25th September. Exploring some of the biggest issues shaping the futu...