New proposals could help thousands as mortgage holiday ends
As the coronavirus-related payment holidays are set to come to an end on 31st October 2020, many homeowners are concerned about what that might mean for their financial situation.
Yet the Financial Conduct Authorities (FCA) most recent proposals may offer some light at the end of the tunnel for those struggling to make ends meet.
At the beginning of the lockdown, the Financial Conduct Authority introduced a three-month payment holiday for mortgage customers, allowing people struggling to make payments to apply to temporarily freeze their mortgage payments.
This payment holiday is due to end on the 31st October, meaning that those who opted for the payment holiday will have to start making mortgage repayments again. However, with the economy predicted to take time to recover, there’s little doubt that many will continue to struggle to meet their financial commitments.
Due to this instability, the FCA has made a series of proposals that they hope will help to support customers as the pandemic continues, even after the payment holiday deadline has passed.
What are the FCA proposals?
The FCA has advised mortgage providers and lenders to contact their customer before the payment holiday comes to an end, to provide them with information about restarting payments and any available support.
The FCA has also highlighted that the support offered should offer flexibility and take each person’s situation on a case by case basis. Their proposals underpin that the support offered should include the following:
- Extending mortgage terms to provide flexibility.
- Allowing customers to change the mortgage type e.g. to an interest-only mortgage.
- Deferring payments and extending deadlines.
The FCA has implored lenders to be more aware of the current situation and how it may be impacting their customers’ ability to meet their financial obligations e.g. local lockdowns and furlough may be making it difficult for individuals to manage finances.
Due to this situation, the FCA has made it clear that lenders need to offer more long-term support, allowing customers to change their mortgage and defer payments to a later date where required. Thus, offering customers the opportunity to fix their current situation and help ease the likelihood of getting a bad credit score.
After the 31st October, the FCA has told lenders that they should be reporting any payment deferrals to the relevant credit agencies. This is a major change that is predicted to impact many of those with mortgages, yet the FCA has also instructed lenders to make their customers very aware that taking further payment holidays will impact their credit records.
Although FCA is not organising a formal consultation on the new guidelines but has requested for any feedback to be provided on the proposals by 5 pm on Tuesday 1st September.
For more details about the proposals and to see how to contact the FCA with your comments, visit their site at https://www.fca.org.uk/
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