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Majority of Property Transactions Since May 2020 Backed by Mortgages

Mortgages have fuelled 70% of property transactions across Great Britain since the market reopened back in May of last year, after initial lockdown restrictions were imposed, according to a research.

Enness analysed market data on mortgage-financed sales as a percentage of all sales in each area of Britain between May 2020 and November 2020.

While 270,785 of the 387,667 homes sold across Britain (70%) have seen the buyer backed by a mortgage, there is some regional difference. In London, 80% of all sales have come through homebuyers with a mortgage, with the East of England, West Midlands (72%), the South East and East Midlands (71%) also coming in higher than the national benchmark.

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In contrast, the South West is home to the most cash homebuyers with just 64% of homebuyers purchasing via a mortgage.

With the capital home to the largest regional percentage of mortgage-backed purchases, London also accounts for the top three highest at local authority level. Lewisham is the mortgage hotspot of Britain for homebuyers with 88% of all transactions financed via the sector, followed by Barking and Dagenham and Waltham Forest (87%).

Slough and Crawley are home to the highest percentage of mortgage-based purchases outside of London along with Hillingdon (86%).

At the other end of the spectrum, just 40% of property transactions in East Lindsey have been financed by a mortgage since the market reopened in May of last year. North Norfolk (43%), Argyll and Bute (44%), Torridge, Ceredigion (45%), Scarborough (48%), Rother, South Hams and Pembrokeshire also rank with some of the lowest levels of mortgage-financed transactions.

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“A lot has been made about the boost in buyer demand due to the stamp duty holiday, but it’s the continued low rates of borrowing that have really been the foundation of this heightened market activity.

While a stamp duty saving is nice, the ability to secure finance at a much lower rate of interest than historically possible has brought about a major boost to market sentiment in recent years and the impact is clear, with 70% of all transactions financed as such.

Some lenders have begun to tighten their lending criteria and this could make it harder for those with a less stable financial background to obtain a mortgage. However, it’s unlikely to impact the actual ratio of mortgage-financed buyers in relation to those purchasing with cash, particularly while the Bank of England keeps rates at sub-one per cent.”

BY PETE CARVILL

Source: Property Wire

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Details of new 5% deposit mortgage scheme to be outlined in Budget

Ultra-low deposit mortgages are set to make a comeback with a new 5% deposit home loan guarantee scheme.

Details about the new scheme are expected to be set out in Chancellor Rishi Sunak’s Budget on Wednesday.

The scheme will be available to current homeowners as well as first-time buyers looking to buy a house for up to £600,000.

The initiative will be available to lenders from April and is designed to increase the appetite of mortgage lenders to offer high loan-to-value lending to creditworthy customers across the UK.

Under the scheme the Government will offer to take on some of the risk of low deposit loans, meaning lenders would have some protection from potential losses.

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Low deposit loans are often seen as more of a risk because borrowers could end up in negative equity if house prices fall – meaning they owe more than their property is worth.

Lenders will be able to purchase a Government guarantee that compensates them for a portion of their losses in the event of foreclosure.

All lenders under the scheme will offer mortgages fixed for at least five years as part of their range of products, providing options for consumers with smaller deposits who want the security and predictability of a mortgage with a fixed rate over a longer term.

The new initiative follows in the footsteps of the UK-wide Help to Buy mortgage guarantee scheme, which was launched in 2013 and helped to reinvigorate the market after the 2008 financial crisis.

That scheme, which also offered 5% deposit mortgages, is no longer running.

It helped more than 100,000 households across the UK to buy a home, but it also drew accusations of pumping up property prices.

Many low deposit mortgages vanished from the market last year amid concerns about the wider economy.

However, more recently, lenders have been bringing back low deposit deals, clustered around the 10% deposit level.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

For example, Yorkshire Building Society launched two new 10% mortgages on Wednesday exclusively for first-time buyers.

In recent months, house prices have jumped to record highs, fuelled by buyers wanting to move to make lifestyle changes, as well as a temporary stamp duty holiday.

The stamp duty holiday is due to end on March 31, but it could be extended by another three months in the Budget, according to recent reports.

Rightmove estimates that 100,000 buyers who agreed a purchase last year are set to lose out if the deadline remains at March 31.

In total, it estimates an additional 300,000 property transactions in England could get through if the deadline is extended to June, saving buyers £1.75 billion in total.

Rightmove’s property expert Tim Bannister said: “We estimate that around 100,000 sales will miss the current March deadline, and so if the holiday is extended to the end of June it would give these the chance to complete in time, plus a number of other sales could now make it through that were only agreed at the start of this year.”

Kate Eales, head of regional residential agency at Strutt & Parker, said a possible extension “is likely to motivate potential buyers who thought about entering the market but might have been put off by lockdown restrictions and felt they had already missed the boat with this holiday altogether”.

She added: “An extension, combined with the recent Government road map to normality, is likely to work together to encourage more to come to the market and take advantage of the holiday.”

Prime Minister Boris Johnson said previously: “I want generation rent to become generation buy and these 95% mortgage guarantees help to deliver this promise.

“Young people shouldn’t feel excluded from the chance of owning their own home and now it will be easier than ever to get on to the property ladder.”

Mr Sunak said previously: “By giving lenders the option of a Government guarantee on 95% mortgages, many more products will become available, helping people to achieve their dream and get on the housing ladder.”

Source: Express and Star

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Mortgage options hit highest level since first national lockdown

With lenders continuing to gain confidence, homebuyers and investors seeking mortgages now have the highest level of mortgage options available since March 2020.

Lenders recently launched a range of new mortgage options for property buyers. Currently, there are 3,215 mortgage deals available, according to Moneyfacts. This is the highest number in 11 months, when there was 5,222 deals available on the market.

In the first half of 2020, mortgage options fell sharply. Many lenders withdrew mortgages while they reassessed the level of risk they could take in the wake of the COVID-19 pandemic. In particular, borrowers with smaller deposits had few mortgage deals available.

During the second half of 2020, the mortgage market started recovering. Since October, the number of mortgage options has grown by 42%. This is the biggest four-monthly increase since 2007 .

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Additionally, at the end of 2020, mortgage approvals were at the highest level since 2007. The housing market remained busy as homebuyers and property investors have been rushing to beat the stamp duty holiday deadline.

Mortgages with smaller deposits available

Choice in mortgages is particularly increasing for borrowers with smaller deposits. In the past few months, the most significant rise was for 90% loan-to-value (LTV) mortgages. This LTV mortgage where borrowers only need to put down a 10% deposit is typically used by more first-time buyers.

Eleanor Williams from Moneyfacts says: “Those with 10% deposit or equity might be especially pleased to note that this tier has, for a second month, seen the largest uplift in availability.

“With products at this level often favoured by first-time buyers and traditionally being seen as higher risk for providers, willingness to extend lending in this risk bracket could be an indication that lenders have confidence in the sector, despite ongoing, wider economic uncertainty. This is echoed by the average two and five year fixed rates at 90% LTV seeing the largest fall of all the lending tiers, reducing by 0.09% and 0.07%.”

Mortgage interest rates stabilising

Average interest rates have increased across all LTVs. However, the average rate has increased only fractionally, which shows rates are stabilising. This is likely due to increased competition in the mortgage market. It also shows lenders are gaining more confidence and less risk averse than before.

Eleanor Williams comments: “At 2.53%, the two year fixed overall average rate is now 0.11% higher year-on-year, while the five-year equivalent at 2.73% is equal to where it sat in February 2020.

“Therefore, while these rates have risen again, the increases are of just 0.01% and 0.02% this month, which may be a sign of the start of some stability in the market, especially when compared to the drastic monthly increases witnessed over the course of last year.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Choosing the best deals

Moneyfacts advises borrowers to take into account a number of factors when choosing a mortgage deal. Don’t look at just the interest rate. It’s important to also take product fees and incentives into consideration.

Recently, two-year fixed products have been particularly popular. Two-year fixed deals typically have lower interest rates than five-year fixed deals. However, for some, the five-year option could be a better choice in the long run. And the interest rate gap between two and five-year fixed rates mortgages has dropped to its lowest level since 2013, according to Moneyfacts.

As the economy and mortgage market remains uncertain, five-year fixed deals could provide longer-term stability. However, this depends on the borrower’s needs. Seek independent financial guidance to find the best mortgage deal for your circumstances.

By Kaylene Isherwood

Source: Buy Association

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Low deposit mortgage deals at six-month high

The mortgage market has shown signs of recovery as the number of 90% loan to value (LTV) products reached a six-month high while overall choice has improved.

The number of low deposit mortgages almost doubled from 72 to 160, according to a Moneyfacts report.

However, those who require a 90% LTV mortgage still have fewer options than those with more money to put down. Borrowers who qualify for an 85% LTV mortgage have 439 products to choose from and 75% LTV borrowers have 629.

In total, there are currently 2,893 residential mortgages on the market, the most recorded since April 2020 when there were 3,192 mortgages available. This is up slightly from the 2,782 on the market last month.

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Rates on the up

The average rate for a two-year fixed mortgage across all LTVs rose for the sixth month in a row by 0.03% to 2.52%, the highest average rate since January 2019.

The average two-year fixed rate is also 0.08% higher year-on-year and a 0.53% rise on the record low seen in July. The record low rate coincided with a period when there were just 70 high LTV products on the market, where higher rates are typically seen.

The average rate for a five-year fixed deal across all tiers also increased in January from 2.69% to 2.71%. However, this was lower than the average rate of 2.74% during the same month last year.

As well as returning to the market to serve borrowers with a smaller deposit, lenders also appear to be treating those in need of a 90% LTV more favourably by reducing borrowing costs.

The average rate for a two-year fixed mortgage at this tier dropped from 3.79% to 3.65% over the month while a five-year fix fell from 3.92% to 3.79%.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Eleanor Williams, spokesperson at Moneyfacts, said: “Following the sharp drop off in availability in 2020, it is positive to see we are beginning 2021 with the total number of mortgage deals rising for the third consecutive month.

“Not only is the increase in product choice a positive for borrowers, but it seems that a measure of competition may have started to return to some sectors as well.”

She added: “This improvement in options for mortgage borrowers has occurred at a time when high levels of borrower demand have been fuelled by those hoping to benefit from the stamp duty holiday and by those who re-evaluated what they want from a home and were part of the unleashed demand that arose after the first lockdown in 2020.”

Written by: Shekina Tuahene

Source: Your Money

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Low deposit mortgage deals double as lenders return to market

Mortgage borrowers with a 10% deposit now have almost double the choice of deals compared to September, as lenders have started trickling back into the market, analysis reveals.

There are 80 mortgage products available to borrowers today with a deposit or equity of 10% required, according to Moneyfacts.

At the start of September, there were only 44 deals available on the same basis.

In the past week alone, the number has jumped from 65 to 80, the data revealed.

Atom Bank, TSB and Platform are among the players to have added 90% Loan to Value (LTV) mortgages to the market this week.

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And Nationwide today announced it would expand lending at this level beyond first-time buyers.

The market for high LTV lending (low deposit) collapsed as the pandemic struck earlier this year, leaving many borrowers who could not scrape together bigger deposits with no option but to delay transactions.

In recent months, some lenders returned to 90% LTV lending for short stints of just a couple of days or, in some cases, only hours in an effort to manage volumes.

As more lenders filter back into the space, the pressure appears to be easing.

However, lending at 95% LTV remains very limited with still only eight products currently on the market.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Eleanor Williams, spokesperson at Moneyfacts, said: “It is really encouraging that we are beginning to see more lenders relaunch products in the 90 per cent LTV bracket, especially for those borrowers with lower levels of deposit or equity who may have felt they had little to no options to move forwards with of late.

“We have seen a few lenders put their toe into the water of high LTV lending with short-term, limited edition products which were only on offer for a day or so, therefore seeing further providers enter this arena could be demonstrating that mortgage providers are managing their operational demands and are keen to cater to these borrowers.

“Those who are keen to take advantage of one of these 90 per cent LTV deals could do well to secure the support and guidance of a qualified, independent adviser who will be aware of the most up to date products available and be on hand to help borrowers navigate the mortgage maze.”

Written by: Lana Clements

Source: Your Money

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Mortgage payment holidays have been a vital lifeline

Mortgage payment holidays have proved a vital lifeline for homeowners struggling financially due to the COVID-19 crisis, according to online mortgage broker Trussle.

However, following the Financial Conduct Authority’s (FCA) statement that mortgage payment holidays will not extend past 31 October, and further financial supports after that point will affect borrowers’ credit files, Trussle has urged homeowners to use caution with this support system.

Miles Robinson, head of mortgages at Trussle, said: “It’s clear that mortgage payment holidays have proved a vital lifeline for some homeowners who have suffered financially as a result of the coronavirus pandemic.

“It’s important to know that unlike before, if you need financial support from your lender after 31 October, it will be marked on your credit file.

“We’d urge homeowners to only utilise the mortgage payment holiday if it’s essential.”

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Robinson also highlighted that once a homeowner’s mortgage payment holiday reaches its end, their monthly payments will increase as a result of additional interest being added to the total mortgage balance.

Meanwhile some lenders offer other viable alternatives; this includes switching some of the loan amount to interest-only payments in the short-term.

Miles Robinson, head of mortgages at Trussle, said: “For existing homeowners, now could also be a good time to think about remortgaging.

“Our customers save £334 on average per month by remortgaging onto a fixed rate, so it is worth using a remortgage calculator to see if switching could save you money.

“Any aspiring or existing homeowners who are considering taking a mortgage payment holiday should seek professional advice as soon as possible to discuss their options.”

By Jake Carter

Source: Mortgage Introducer

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FCA announces extension of mortgage holidays

The Financial Conduct Authority (FCA) has confirmed the extension of mortgage holidays for consumers who still face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current FCA mortgage guidance ends.

The FCA has published additional guidance for firms meaning they must offer further short and longer-term support reflecting the circumstances of their customers. This could include extending the repayment term or restructuring of the mortgage.

Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track. This additional guidance will come into force on 16 September 2020.

Christopher Woolard, interim chief executive at the FCA, said: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. Consumers in these situations will benefit from firms providing them with tailored support.

“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”

Under the guidance published today, firms will prioritise support for borrowers who are at most risk of harm, or who face the greatest financial difficulties.

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The new guidance reinforces the need for firms to deliver outcomes that are right for individual borrowers rather than adopting “one size fits all” solutions. The FCA will be monitoring firms to ensure borrowers are treated fairly having regard to their individual circumstances.

The FCA has said that firms will also signpost borrowers to the support they need in managing their finances, including through self-help and money guidance, or refer borrowers to organisations that can provide free debt advice if this meets their needs and circumstances.

Where borrowers have taken, or are taking, payment deferrals under the existing guidance and require further support from lenders these further arrangements can be reflected on credit files in accordance with normal reporting processes. This also applies to borrowers newly affected by coronavirus who receive support from their lender after 31 October.

This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.

The FCA’s current guidance published in June will continue to provide support for those impacted by coronavirus until 31 October 2020 – with consumers able to take a first or second three-month payment deferral until this date.

The June guidance is due to expire on 31 October and the FCA do not intend to extend this guidance. The guidance published today ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or they are newly affected by coronavirus after 31 October.

However, the watchdog has said it will keep the guidance under review and if circumstances change significantly, consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic.

Source: Scottish Housing News

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Stamp duty freeze leads to ‘busiest’ week for mortgage searches

The week following the stamp duty holiday announcement has been the busiest for mortgage searches all year, according to mortgage technology provider Twenty7Tec.

Yesterday (Tuesday 14 July) experienced the greatest number of searches in the year to date, highlighting how much of an impact the chancellor’s announcement to cut stamp duty has made on the market.

There was also a flurry of activity in the buy-to-let sector which had not been experienced since February. Twenty7Tec reported this week has been the busiest for buy-to-let searches, according to its platform’s data.

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Today marks exactly one week since chancellor Rishi Sunak announced he was freezing stamp duty on properties worth up to £500,000 until March 2021.

Phil Bailey, Sales Director at Twenty7Tec said: “Since the stamp duty announcement last week, the market has really hit its stride.

“The last seven days have been the busiest for mortgage searches all year and we’re handling increased volumes of searches each day. Yesterday was the busiest day of the year, closely followed by the day before. Yesterday’s residential mortgage searches were triple the volumes in lockdown.

“Buy-to-let has definitely pushed on and the past few days have been the busiest since the first couple of weeks in February.

“Our sense is that buy-to-let will increase further as the products are there for that part of the market and the risk profile of buy-to-let is still attractive to lenders.”

By Kate Saines

Source: Mortgage Finance Gazette

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Borrowing is on the way to returning to healthy levels

Despite Bank of England figures that showed mortgage approvals hit a record low of 9,300 in May, there are signs that borrowing is returning to normal levels, according to Hometrack.

The Bank of England’s Money and Credit Report showed that households repaid more loans than they took out in May, but that there was still a small increase in mortgage borrowing.

On net, households borrowed an additional £1.2bn secured on their homes, higher than £0.0bn in April, but weak compared to an average of £4.1bn in the six months to February 2020.

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David Ross, managing director of Hometrack, said: “The data released by the Bank of England is encouraging and shows that borrowing, while not at pre-COVID levels, is certainly returning.

“On a more positive note our data for June shows continued growth and is up on the same period in 2019.”

For the market to return to normal, Ross added, providers must continue to innovate and focus on the customer.

He said: “Continued stimulus is key to maintaining this growth.

“We urge mortgage providers to focus on delivering the very best customer experience, removing complexity through digitisation and ensuring fewer barriers to borrowing.

“This in turn will help grow new lending, helping the economy get back on its feet after the shock of COVID.”

By Jessica Bird

Source: Mortgage Introducer

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Homeowners set to be able to extend mortgage payment holidays

Those struggling to pay their mortgage due to coronavirus are set to be able to extend their payment holidays for three more months, or start making reduced payments, in proposals published today.

On 17 March, banks agreed with the Chancellor that they would offer ‘forbearance’ (tolerance and help) on mortgages, meaning they all should offer those struggling a three-month ‘holiday’, allowing customers a temporary break from having to make mortgage payments during this time.

Over 1.8 million mortgage payment holidays were taken up, and the first of these will be ending in June. But an extension of another three months will now likely be available.

The Financial Conduct Authority’s (FCA’s) new draft guidance also includes an extension of the application period for an initial mortgage holiday until 31 October 2020, so that customers who haven’t had a payment holiday and are experiencing financial difficulty will be able to ask for one.

The current ban on repossessions of homes will be continued until 31 October as well.

Full info on what the FCA expects mortgage lenders to do?

At the moment, these proposals aren’t confirmed. The FCA says it welcomes comments on them until 5pm on Tuesday 26 May, and then expects to confirm them shortly afterwards. Here’s what it’s proposing:

  • If you’ve not had a mortgage payment holiday, you’ll have until 31 October 2020 to apply. Customers who are making repayments now but get into financial difficulty later will be able to request a payment holiday until 31 October.
  • If your payment holiday’s ending, you can ask for another three months if you’re still struggling. Lenders should continue to support customers who have already had a payment holiday where they need further help, unless granting a further mortgage holiday would create its own financial difficulties.
  • Firms are expected to contact customers on mortgage payment holidays and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this, firms should consider a further three-month payment holiday.
  • If you can make full or partial payments, you should do so. At the end of a payment holiday, firms should find out if customers can resume payments, or part payments. If so, your lender should contact you to agree a plan on how the missed payments will be repaid, which could include spreading the cost of payments over the remaining mortgage term, or extending the mortgage term.
  • The current ban on repossessions of homes will be continued until 31 October 2020.
  • Payment holidays and partial payment holidays won’t go down as a missed payment on your credit file. However, the FCA says that consumers should remember that credit files aren’t the only source of information that lenders can use to assess how creditworthy someone is.

The FCA adds that these recommendations are minimum standards and that they don’t stop firms from going above and beyond, for example, by offering reduced interest.

Buy-to-let mortgages aren’t technically covered by today’s announcement as they’re not regulated by the FCA. Yet if a lender is regulated for its residential mortgage business, the FCA says it also looks carefully at how these firms carry out their unregulated buy-to-let business, so it’s hoped that some mortgage lenders will offer the extensions to their landlord customers too.

What impact could a mortgage holiday have on my credit score?

As Martin and the FCA have pointed out, while mortgage payment holidays won’t be marked as missed payments on your credit report, they could still have an impact on your wider creditworthiness, as lenders can find out about them through bank statements or ‘Open Banking’ data, and can factor them in. As Martin says…

‘We wait to see how substantial the impact will be – but those who need a mortgage holiday should still do it’

The FCA has confirmed, sadly, that while credit files shouldn’t be impacted by mortgage or other payment holidays, lenders are still allowed to take them into account when making their acceptance decisions.

It’s impossible to say yet how widespread this will be or how substantial the impact will be – we’ll start to learn that over the next year. Each lender’s assessment process is different; it’s a dark art that’s hidden from the public and never published, so this is likely to be yet another factor applicants will need to navigate.

Certainly many new challenger financial firms talk about their new, more sophisticated customer assessment models, that they believe are better than just relying on credit files. It’s that very fact that sparked me to look at this in the first place. And as they will be able to see that someone has temporarily not paid their mortgage, they can spot payment holidays.

My hope is that as these holidays are specifically for the short-term financial hit of coronavirus – and as the practice is so widespread – it won’t be used by many firms, and where it is it won’t tarnish individuals’ credit reputation for too long. But there’s no real way to know.

Most importantly, I don’t believe this should stop anyone who needs a mortgage holiday from getting one – if it’s crucial for cash flow, just do it. Yet for those on the border, who may find it temporarily useful but can cope without it, add this to the fact that interest racks up during the payment holiday and I’d err on the side of caution.

What does the FCA say?

Christopher Woolard, FCA interim chief executive, said: “Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to restart mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday will also continue to be able to apply until 31 October.”

By Callum Mason

Source: Money Saving Expert