Mortgage lenders are committed to supporting borrowers who are reaching the end of a three-month payment holiday to choose the next steps that best suit their needs, according to UK Finance.
This comes after HM Treasury confirmed last week (May 22) that mortgage customers, who were struggling to pay due to the coronavirus, can extend their payment holiday for an additional three months or begin to make reduced payments.
Figures from UK Finance showed that an equivalent of one in six mortgages are currently covered by a payment holiday, with more than 1.82m payment holidays having been issued as of May 20.
The industry body said it was “important that customers receive the support that is right for them” and for those who had already taken a payment holiday, an extension “may be appropriate in some circumstances”.
It encouraged borrowers who are concerned about their ability to pay to contact their lender and consider the “full set of options available to them”.
These include reduced payments, a move to interest-only payments for a period, extending the term of the mortgage to reduce payments, taking a payment holiday if the customer has not already done so or a further extension of the payment holiday.
Stephen Jones, UK Finance CEO, said: “Mortgage lenders are committed to providing those borrowers nearing the end of their three-month payment holiday with help and flexibility in choosing the next steps which best suit their needs.
“The industry looks forward to regulatory guidance being finalised swiftly to ensure both borrowers and lenders can plan over the coming weeks.
“Meanwhile those borrowers who have already taken a mortgage payment holiday and can afford to make payments are encouraged to do so, as this will reduce the level of their repayments in the long run.”
In response, Vim Maru, retail director at Lloyds Banking Group, said: “We are already proactively contacting our customers who will be reaching the end of their repayment holidays to support them in restarting their payments.
“For those who may continue to be financially impacted, we will offer a range of support based on their current financial circumstances.”
But Dominik Lipnicki, director at Your Mortgage Decisions, said he would welcome a “more uniformed approach from lenders when it comes to the ease of application [of a payment holiday] and how these borrowers are looked at in the future when remortgaging or buying a new home”.
Research from YouGov for Nationwide found that 21 per cent of homeowners in April were worried about not being able to keep up with mortgage payments, and 14 per cent feared losing their home.
Lenders have also committed to continue suspending involuntary repossessions for residential and buy-to-let customers until October 31, as set out in the Financial Conduct Authority’s draft guidance for lenders published last week (May 22).
On the day the FCA published its draft guidance, Nationwide pledged that none of its mortgage customers, who fell into arrears as a result of Covid-19, would see their home repossessed until the end of May 2021, if they worked with the provider to “get their finances back on track”.
Joe Garner, chief executive at Nationwide, said: “As a mutual, founded to help people into a home of their own, this is what building societies have always been about. We hope this additional support will provide extra flexibility to those who most need it, to help get them back on track.”
Mr Lipnicki added: “The fact that repossessions are on hold is a very welcome relief for affected borrowers and I am sure that more flexibility will need to be applied even after October 31”.
By Chloe Cheung
Source: FT Adviser