- Over 1.6 million mortgage payment holidays have been offered to homeowners impacted by Covid-19.
- Lenders continue to offer product transfers enabling existing customers who come to the end of their fixed term, and meet eligibility criteria, to move to a new deal.
- For the first time, mortgage holders on payment holidays due to Covid-19 or who have been furloughed will now also be able to switch to a new deal at the end of their term.
- One in seven mortgages in the UK are now subject to a payment holiday.
- Almost 700,000 payment holidays granted to mortgage holders in April.
Lenders have given over 1.6 million mortgage payment holidays as of Friday 24 April 2020 to support customers facing financial difficulties due to coronavirus, UK Finance reveals today.
One in seven mortgages are now covered by payment holidays following steps taken by lenders to help households whose finances have been affected by the Covid-19 crisis. For the average mortgage holder, the payment holiday amounts to £755 per month of suspended payments.
Lenders continue to offer product transfers enabling existing customers who come to the end of a fixed term product, and meet eligibility criteria, to move to a new deal. Further to the industry agreement announced in July 2018, the industry today also announces additional help for homeowners on payment holidays or for those who have been furloughed. Normally customers on payment holidays would not qualify for a product transfer, but given the current exceptional circumstances lenders are waiving this rule to help borrowers impacted by Covid-19. Product transfers are for like-for-like mortgages and tend not to require a new affordability assessment, meaning existing borrowers who have been furloughed will also be eligible.
More than 1.2 million mortgage payment holidays were approved in the first three weeks of the scheme, and hundreds of thousands more customers have been granted payment holidays in the last fortnight by lenders helping mortgage holders affected by the coronavirus. Over one third of all payment holidays approved so far were done so between 25 March and 1 April, as lenders worked with customers quickly after the scheme was announced to ensure homeowners impacted by Covid-19 received the support they need.
Commenting, Stephen Jones, UK Finance CEO, said:
“Lenders understand that many households are seeing their finances squeezed due to the coronavirus pandemic and we are working hard to help customers get through these tough times.
“The industry has acted quickly to support homeowners through this crisis and has taken decisive steps to ensure that eligible customers on payment holidays due to Covid-19 can opt for the security of fixing their monthly mortgage payments going forward.
“There is a range of support available to mortgage holders concerned about their finances. We would encourage any homeowners impacted by coronavirus to visit their lender’s website in the first instance to find out more information and how to apply.”
Robin Fieth, Chief Executive of the Building Societies Association (BSA) commented:
“The Covid-19 situation means that right now times are far from normal and many households are worried about their finances. Lenders are working hard to help in a range of ways and it is right that this now includes the ability for those on a three-month payment holiday to be able to switch onto a new product with their existing lender at the end of a fixed term product should the two events coincide.”
Kate Davies, Executive Director of the Intermediary Mortgage Lenders Association (IMLA), commented:
“This agreement builds on the commitment made by lenders in July 2018 to contact customers who are coming to the end of a mortgage deal and discuss what alternative options might be available.
“It offers additional – and no doubt welcome – reassurance that customers will not be penalised if they have sought an approved payment holiday during this difficult period.”
Mortgage borrowers whose financial situation has been affected by Covid-19 are advised to contact their lender to discuss whether they are eligible for a mortgage payment holiday and if it is the best option for them. A payment holiday may not be the right choice for everyone, and customers should only apply if they need one. Those requiring this support will need to self-certify that their income has been either directly or indirectly impacted by the coronavirus.
Many lenders are offering customers the option to apply for a mortgage payment holiday through an online form on their website, as telephone lines remain extremely busy. Lenders are also urging mortgage holders not to cancel their direct debits before a payment holiday has been agreed, as this will be counted as a missed payment and could impact their credit file.
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Notes to Editor
1. UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms across the industry, we act to enhance competitiveness, support customers and facilitate.
2. The BSA represents all 43 building societies and 6 of the larger credit unions, all mutual owned bu the customers.
3. Figures relate to the total first charge mortgage market, grossed up from a representative sample up to Friday 24 April 2020 The figures include both residential and buy-to-let mortgages, and may be subject to modest revision as firms identify double-counting and other anomalies in previous daily totals.
4. Of the 1.6 m repayment holidays more than 300,000 have been granted by building societies.
5. UK Finance’s latest figures on mortgage product transfers reveal that 1,195,200 homeowners switched product with their existing provider during 2019, 1.4 per cent more than in 2018. This represented £167.4 billion of mortgage borrowing refinanced internally. More information on the mortgage product transfer announcement can be found here.
6. To further support customers, lenders have renewed and expanded a commitment to help existing mortgage customers easily switch to a new deal when they reach the end of their term. Under an industry-wide agreement2 introduced in 2018 by UK Finance, the Building Societies Association (BSA) and the Intermediary Mortgage Lenders Association (IMLA), any eligible customer coming off a fixed-rate mortgage is routinely offered a product transfer by their lender. This gives customers the option to switch to a new deal with their existing lender instead of automatically moving onto a reversion rate.
Customers who meet the following criteria will be routinely offered a product transfer:
- be first charge owner-occupiers
- existing borrowers of an active lender
- the end of their fixed-rate term
- looking for a like-for-like mortgage
- up to date with payments - a repayment holiday is a deferred not a missed payment
- a minimum remaining term of two years
- a minimum outstanding loan amount of £10,000
- exclusion will apply to securitised or closed book lenders, where the ability to offer product transfers to existing customers is not possible.
7. The value of the average interest payment deferred each month (£260) and the average value of suspended payments per month (£755) is calculated using the average interest rate (2.37 per cent) on an average loan size (£132,128) in the UK. These figures are correct as of 31 December 2019.
8. There are currently 10,993,000 outstanding first charge mortgages in place in the UK, meaning the mortgage payment holidays in place account for 15 per cent of total mortgages or slightly over one in seven.
9. More information on the measures introduced to support mortgage customers impacted by Covid-19 is available here. These measures include:
- A three-month moratorium on residential and buy-to-let possession action, giving customers reassurance that they will not have their homes repossessed at this difficult time.
- Offering payment holidays to all buy-to-let landlords whose tenants have lost income because of the impact of Covid-19, with landlords expected to pass on this relief to their tenants to ensure that they are supported during this time.
- Offering customers who have exchanged contracts for a house purchase the option to extend their mortgage offer for up to three months to enable them to move at a later date.