Mortgage holiday end in sight

David Banks
Authored by David Banks
Posted Thursday, October 29, 2020 - 12:17pm

When the covid-19 pandemic began the UK government introduced the mortgage holiday scheme to give homeowners in financial difficulty some much needed respite. Almost 2 million applicants have received a complete or partial freeze on mortgage payments since the scheme began. With the end of the mortgage holiday, October 31st, now just a couple of weeks away, questions are being raised as to what happens next.

The Financial Conduct Authority (FCA) has stated that the scheme will not be extended beyond the current end date, although they have not yet ruled out the possibility and continue to consider an extension as events unfold. In place of the scheme the FCA recommends lenders provide tailored assistance to those struggling to make repayments. According to a statement made by the FCA, this advice applies to those “who continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus”.

In order to support borrowers who continue to struggle financially, along with those who’s financial problems are just starting, the FCA has suggested a range of support options. These include extending the borrower’s payment terms, restructuring the mortgage, reducing the cost of repayments temporarily, or, when absolutely necessary, accepting a short-term payment freeze. Alongside these concrete support mechanisms, the FCA also urges lenders to provide customers with financial management support “through self-help and money guidance”, along with access to debt support services.

While commendable, the recommended supports may fall short of what some borrowers need and since they are not mandatory lenders may choose repossession over a payment freeze if the customer seems unlikely to recover financially. For many homeowners in this situation, selling their house fast may be the best way to avoid repossession. There could be a steady stream of such properties coming onto the market as people attempt to avoid financial ruin by downsizing or turning to the rental sector.

The exact consequences of the mortgage holiday coming to an end are perhaps not fully understood. It is clear that the FCA is hopeful that consumers will be able to continue paying their mortgages and undoubtedly mortgage holders are keen to return to this situation as well. Whether the reality will meet the expectation is yet to be seen. With the holiday ending there will likely be many people turning fast property buying companies under the current job market. 

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