- Mortgage lenders support the Financial Conduct Authority’s (FCA) proposed extension to the moratorium on possessions to 1 April 2021.
- The extension would still apply to both residential and buy-to-let mortgages.
- The mortgage industry’s continued support for an extension on possessions follows the government’s extension of the moratorium on private tenant evictions until 21 February 2021 in England. Wales and Scotland have banned rental evictions until 31 March 2021.
Further to the FCA’s consultation announced today, mortgage lenders support the further extension to the moratorium on possessions to 1 April 2021. The extension will help provide reassurance to both residential and buy-to-let borrowers that they will not have their homes repossessed at this difficult time. The continued support from banks and building societies follows the government’s announcement to extend the ban on bailiff activity in England until 21 February 2021. Wales and Scotland have banned rental evictions until 31 March 2021.
The mortgage industry’s continued commitment to the possessions moratorium sits alongside payment deferrals and additional forbearance measures which lenders continue to provide to customers that are struggling with the financial impact of the pandemic. Under the extension, members of UK Finance and the Building Societies Association (BSA) will agree not to seek, or enforce, a warrant for possession before 1 April 2021, unless there are exceptional circumstances such as a customer requesting proceedings to continue or when the property is in vacant measures. This latest extension means the measures will have been in effect for 12 months by its end date.
For customers already in arrears before Covid-19 and who continue to be unable to make payments towards their mortgage, lenders will be in contact to work towards resolving their case, this could include customers choosing for possessions to go ahead. It will always be in the long-term interest of customers who are able to do so to resume making payments, but for anyone who is still struggling, ongoing support will be available. Lenders continue to show flexibility to borrowers in financial difficulty and possession is always a last resort, however, it’s always better for customers to pay if they can otherwise the debt will continue to increase.
Eric Leenders, Managing Director of Personal Finance at UK Finance, said:
“The banking and finance industry is committed to providing ongoing support to those facing financial difficulty as a result of the pandemic.
“The industry is fully supportive of a moratorium on possessions remaining in place until 1 April 2021 to ensure customers do not lose their home at this difficult time. This is part of a package of support provided by lenders for those who need it, including payment deferrals and tailored assistance. It is vital that customers who are concerned about their finances go online or contact their lender to understand what options and support are available to them.”
Paul Broadhead, Head of Mortgage and Housing Policy at the Building Societies Association, said:
“Mortgage lenders recognise the unique circumstances which are affecting some borrowers during the pandemic, a situation which can only be exacerbated by the current lockdown and the need for some businesses to temporarily close.
“Normal forbearance measures will continue to be in operation however long the pandemic persists, but we are also asking Government to do their part, in the first instance by reducing the time that borrowers must wait for a Support for Mortgage Interest loan from the current 39 weeks to 13 weeks, adding to the options available, particularly for those who were in financial difficulty before the pandemic.”
UK Finance and the Building Societies Association will respond in support of the Financial Conduct Authority’s (FCA) draft guidance published today to extend the regulatory flexibility that allows lenders to continue to provide certainty to customers.
As part of the ongoing support lenders are providing to customers, banks and building societies have extended the provision of mortgage payment deferrals of up to a maximum of six months until 31 July 2021. Consumers have until 31 March to apply and will need to apply in good time before 31 January if they are eligible for, and require, a full six-month deferral. For borrowers who have already taken a total of six months of payment deferrals and continue to need additional assistance, all lenders will offer tailored support, taking into consideration personal circumstances including any Covid-19 restrictions that may be imposed.
Notes to Editor
For more information:
- 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 innovation.
- The Building Societies Association (BSA) is the voice for all 43 building societies and 6 of the larger credit unions. Between them these organisations serve over 25 million consumers across the UK.
- Banks and building societies have extended the provision of mortgage payment deferrals of up to a maximum of six months until 31 July 2021.
- The banking and finance industry has put in place a clear plan to help Britain through:
- 2.7 million mortgage payment deferrals
- 27 million interest-free overdrafts offered, 1.18 million payment deferrals on credit cards and 828,000 payment deferrals on personal loans
- Over £68 billion of lending to more than 1.5 million businesses through government Covid-19 lending schemes
- Protecting customers from scams and fraud
- Higher limit for contactless payments
How will the possession moratorium work?
Key information: lenders will not issue a warrant for eviction or enforce an existing warrant before 1 April 2021.
- Lenders can commence court action, including obtaining a possession order from the courts but will not seek a warrant to enforce the possession while the Moratorium is in place.
- Lenders will aim to engage or re-engage customers who were already in proceedings prior to March 2020 or who are not in contact with the lender and have not been paying their mortgage for some time, via letters or phone calls.
- Customers impacted by Covid-19 may still make use of payment deferral support.
- Lenders are able to issue a formal demand, so that the customer is aware of the money they owe and informed that the case will go to possession proceedings.
- Lenders will seek to resolve the case through alternative means, including informing the customer about voluntary means and rehousing options.
- It is important that customers who were in long-standing financial difficulty pre-pandemic contact their lender to discuss their options, including options to pay if they can.
- Firms can proceed with repossession in exceptional circumstances, including for empty properties or where the customer wants the possession to go ahead. For buy-to-let customers, lenders may use a Receiver of Rent where appropriate which would allow the tenant to remain in the property if they are maintaining rental payments.
Support for Mortgage Interest (SMI)
Is a loan issued by the Department for Work and Pensions (DWP) to support eligible homeowners, who are in receipt of Income Support, income-based Job Seekers Allowance (JSA), income related Employment and Support Allowance (ESA) Universal Credit providing they have zero earnings or Pension Credit. SMI payments are made directly to the mortgage lender and can be claimed on up to £200,000 of mortgage (or £100,000 mortgage for those on Pension Credit).
The financial support provided by SMI is to help pay the interest charges on mortgage payments or other home loan, for loans of up to £200,000. Irrespective of the interest rate a homeowner is being charged by their lender, the support is based on a Standard Interest Rate which is currently 2.61%, and which can be subject to change. This means that borrowers with a mortgage interest rate higher than 2.61% will still need to make an additional mortgage payment to cover their interest only costs.
In the 2016 the Government extended the waiting period in which the benefit was paid from 13 weeks to 39 consecutive weeks. The exception to this is borrowers’ claiming Pension Credit, who are able to apply straight away for the benefit, ensuring pensioners can remain in their home until they move or the property is sold.
In 2018 Government changed SMI from a benefit to a loan which needs to be repaid with interest, for which a second charge is applied on the mortgage property. Interest on the loan is variable, but it will not change more than twice a year. The current rate is 1.3%. The loan is repaid when the property is either sold or ownership transferred.
We are calling for the waiting time to be reduced from 39 weeks to 13 and for eligibility for claiming SMI to be extended to those on reduced hours and income. Increased flexibility in SMI should not have any long-term impact on Government expenditure.