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Lenders should be clear that mortgage holidays are available to those in arrears, MPs say

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  • 02/04/2020
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Lenders should be clear that mortgage holidays are available to those in arrears, MPs say
Bank and building society websites should make it clear that three-month mortgage holidays are available to all including those in arrears, MPs have said.

 

The ability to apply for the payment holiday should also be included on letters and emails sent out by mortgage lenders and administrators. 

This is to reflect guidance laid out by UK Finance and the government which states that mortgage payment holidays may still be offered to those behind on their mortgage. Many lenders have already agreed to offer the relief to such borrowers.

Kevin Hollinrake, co-chair of the All-Party Parliamentary Group (APPG) on Fair Business Banking and Seema Malholtra, chair of the APPG for Mortgage Prisoners, sounded the warning in a letter addressed to the Financial Conduct Authority (FCA), Treasury and the Bank of England. 

 

Mortgage prisoners 

The MPs also claimed that the FCA’s prediction that 14,000 mortgage prisoners will benefit from affordability assessment changes could be impacted by mass withdrawal of high loan to value mortgages seen in recent days.

It also proposed a cap be placed on standard variable rates based on a maximum margin, similar to that in the energy sector, to avoid interest being accrued at high rates. 

 

Regulatory scope 

It was suggested that the FCA’s powers be extended to ensure commercial lenders receive funds and agree to the same terms on payment holidays as banks. 

The letter said the regulator must have more direct oversight of unregulated funds to ensure the fair treatment of customers across the board. 

Some alternative lenders have had to apply to the British Business Bank scheme to access funds in order to continue lending, but these will not be received for weeks. It was proposed that the Treasury and Bank of England set up a direct scheme for these lenders so they can access funding within days. 

They said if action was not taken in the next three to 18 months, there would be a repeat of the problems seen during the 2008 crisis. 

 

‘Slow to act’ 

The MPs said unregulated lenders were being “slow to act” and in some cases refusing to cooperate with government guidance as they did not fall under the same directives. 

Some unregulated lenders are continuing to threaten repossession actions against government guidance while others are not allowing mortgage payment holidays were payment is due within seven days, the MPs claimed. Instead, borrowers are being told that payment holidays will start the following month. 

Also, commercial mortgage holidays are only being offered on a capital element rather than interest, the letter said, meaning borrowers are still making the majority of repayments. The MPs said if this was not addressed, it could lead to financial difficulties. 

The Bank of England and FCA met remotely with UK high street banks on 30 March to discuss lending money to retail customers such as mortgage borrowers and handling those who may be facing a loss of income. 

Speaking to the Sunday Times, Christopher Woolard interim CEO of the FCA said of the meeting: “It’s about saying, ‘How do we strike the right balance between helping people in the short term and doing the right thing for them in the next three, six months or even longer?’” 

Mortgage Solutions has contacted the Bank of England and the FCA for comment. 

 

 

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