Across the UK and around the world, significant numbers of people have been affected financially by the coronavirus pandemic. As the impact of the virus became clear, the government issued a new policy, which sought to ease the pressure on borrowers’ finances. The policy – aimed at both homeowners and buy to let landlords – offers mortgage holders the ability to apply for a three-month mortgage payment holiday.
If you currently have a mortgage in the UK, you may be wondering if this policy applies to you, and whether you can (or should) access this assistance at this time. The exact answer to this will depend on your circumstances, but as a starting point, our brokers have compiled a brief overview of the key facts and considerations below.
Are all lenders offering mortgage payment holidays?
We work with organisations ranging from global players with an established high street presence to historic private banks and specialist lenders. Understandably, each has different resources and infrastructure available to them, which has an impact on how they are able to respond to unexpected crises like the coronavirus pandemic.
Most lenders have already made it clear that they will be issuing three-month mortgage payment holidays for customers affected by the coronavirus. Some specialist or private lenders have not yet issued such a statement; if your lender falls into this category, we can advise you accordingly.
Who can apply for a mortgage payment holiday?
Mortgage payment holidays during the pandemic are a resource available for those who have been affected by coronavirus. This definition has created some confusion: does this only include an individual who is sick? Or does it include someone who has been furloughed, a full-time employee whose salary has been cut, or a self-employed freelancer with no work?
Borrowers should rest assured that there are no stringent thresholds in place (and certainly no need to prove that you have tested positive for coronavirus). If you have been affected in any way, whether in terms of your health or financially, you should qualify. For buy to let borrowers, landlords who take payment holidays are expected to pass on this relief to their tenants; if tenants are still paying rent as per usual, landlords should not try to claim a mortgage payment holiday.
There should be no need for affordability tests or to provide documents; it is a case of ‘self-certifying’ that you or your tenants have been financially affected.
Will there be a fee or other repercussion for taking a mortgage payment holiday?
The FCA’s guidelines show that lenders should not charge additional fees to arrange payment holidays. Your credit score will not be affected during this period if you do take out a mortgage payment holiday.
However, it is important to note that a payment holiday does not mean borrowers can ‘skip’ paying a mortgage for three months; borrowers will still owe the same amount of capital and interest will accrue on this as per usual.
Are there any alternatives to mortgage payment holidays?
If you currently require a mortgage payment holiday and need advice on this, our team is at your disposal. We can also advise on whether a mortgage payment holiday is the best solution for you at this time, if you are looking to make savings during this period.
For many high net worth individuals in particular – especially those who have finance in place with specialist or private lenders – it may be a better course of action to take a more tailored approach. This could include switching to interest-only payments for a period of time, deferring interest payments or extending your mortgage term to reduce your monthly payments. If you are simply looking to lower your mortgage payments in general, an Articus broker can take you through the best options.
For tailored advice about arranging a mortgage payment holiday – or your other options during this time – speak to an Articus broker today.
