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Mortgage holiday: Extension consultation will end this week – announcement due soon

MORTGAGE and consumer credit holidays can be utilised by those struggling financially as a result of coronavirus. These payment freezes have been extended and updated a number of times but we may yet see further extensions.

Mortgage holiday rules have been extended in recent months given the continued impact of coronavirus. Additionally, payment freezes were also extended to credit card payments and other consumer credit products.

Recently, the FCA revealed that they are consulting and seeking input on these types of support measures.

They are asking credit providers, mortgage providers and consumer groups for early views on what should happen to consumers who are coming to the end of a second payment deferral period.

Interestingly, they detailed that they may consider extending the payment holidays beyond the current October deadline.

They may also look for other solutions down the line if these extensions prove to be unfeasible.

As their announcement detailed: “Our measures to help consumers affected by the impact of coronavirus have included temporary guidance setting out how we expect firms to support mortgage and consumer credit customers facing temporary payment difficulties because of the pandemic, including payment deferrals.

We recently confirmed that the temporary guidance would remain in effect until October 31 2020.

“However, many consumers who have been given a second payment deferral under our temporary guidance will have deferrals that end from September onwards.

“So we want to get early views on the support needed by consumers who have already benefited from our temporary guidance but remain in difficulty.

“We are also seeking views on whether and under what circumstances any aspect of our current guidance should continue beyond 31 October and, if not, what if anything should take its place.”

The FCA will be taking input on this until August 7, which is this Friday.

They’ll then take that information and publish draft guidance as early as this month.

Mortgage holidays can be requested by holders themselves but they need to ensure that this is done correctly.

Some may believe that simply cancelling a direct debit will be sufficient but this is not correct.

If cancellation occurs, it will be counted on a missed payment, which will negatively affect a credit file.

Mortgage payers do not need to take much action at all as, according to the Money Advice Service, lenders will have a fast track approval process in place.

This process will not require the mortgage holder to provide evidence or have an affordability test and as such, the final decision should be made quickly.

It should be noted however that mortgage holidays will defer repayments but interest will still accrue.

This means that once the holiday is completed, the repayments are likely to be more expensive.

This will obviously be made worse if extensions are continually used and so careful consideration should be given before any decision is made.

Credit files/records should not be affected by the utilisation of a mortgage holiday but lenders may still take a holiday into consideration when lending out funds.

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