According to information provided by the BBC, one-sixth of homeowners arranged a mortgage payment holiday. This is the equivalent of two million people, and it is important to note there are now some concerns about the longer-term impact of the mortgage payment holiday.
Lisa Orme is the managing director of Keys Mortgages and she has advised mortgage holders only to take a mortgage payment holiday as a last resort. Lisa said; “We know, anecdotally, that people have used them to pay off credit cards, pay for holidays, pay for cars. I’ve been saying to people, despite all these promises about how it won’t affect your credit file, I absolutely guarantee it will come back to bite you.”
Sarah Coles, personal finance analyst with Hargreaves Lansdown, also spoke on this matter, saying; “Banks will look at your payment history. And if you’ve got a three-month gap around this period, they are going to know that has clearly come from a mortgage holiday. If you’ve got a six-month gap, they are going to know you’ve had to extend it. And that will give them a really clear indication that you were having some financial issues at the time. So it will then make it harder to borrow.”
There has also been clarification on this matter from the FCA who released this statement in May; “Lenders may use sources other than credit files, such as bank account information, to take account of other factors in their lending decisions. These factors could include changes to income and expenditure.”
Lenders are contacting customers with revised payment details
With the end of the three-month period for people who took out the mortgage payment holiday when it was first offered looming, many lenders are contacting customers to outline new payment details.
Virgin Money Group says that there will be no impact of a payment holiday on any lending decision they make in the future, but this isn’t the norm in the industry.
There have been significant numbers of people taking mortgage holiday payments
Lloyds Banking Group, which includes the Halifax, state they have approved 450,000 mortgage payment holidays for customers. The Remote Mortgage Director of Halifax, Tom Martin, has spoken about how a mortgage holiday might impact on a person’s ability to borrow in the future.
Tom said; “We base our decisions on a full understanding of a customer’s up-to-date circumstances. We do take into consideration your latest financial position, but we recognise as well that these are unprecedented times and we will consider individual circumstances as part of that process.”
NatWest have also released a statement on this matter, saying; “We will take customers’ circumstances into consideration when considering any borrowing requests. If a customer’s income is currently impacted by COVID and they are unable to afford their mortgage, we would consider this.”
A Treasury spokesperson said; “The Financial Conduct Authority has been clear that payment holidays should not have a long-term impact on people’s credit rating.”
If you are considering arranging a mortgage payment holiday, but are yet to do so, there is still time. The deadline for households looking to arrange a three-month mortgage payment holiday is 31st October 2020. This support is on offer to anyone who has been negatively affected by the COVID-19 pandemic. Also, it is worthwhile for people to note that property repossessions have been banned by the FCA until the end of October this year.
Anyone looking to arrange informed and up to date guidance regarding a mortgage should speak with an experienced professional.