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Brokers warn mortgage holidays should be ‘last resort’ for borrowers

  • 22/04/2020
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Brokers warn mortgage holidays should be ‘last resort’ for borrowers
Landlords and other borrowers are taking mortgage holidays without necessarily needing them, but this could cause problems in the future, brokers have said.


The chancellor Rishi Sunak announced in March that all borrowers could apply for three-month breaks to help ease financial burdens during the coronavirus outbreak.

Advisers are reporting that some borrowers are seeing it as an opportunity to create some extra cash in the current climate, even if their income has not been affected.

Estate agency Chestertons and its recommended broker Springtide Capital today issued an alert to clients.

Borrowers were warned to only use the holidays as a last resort because their ability to access credit in the future could be impacted.

The government has said payment breaks will not affect credit files, with credit agencies pledging to freeze scores.

However, Chestertons and Springtide said lenders will still be able to see whether borrowers have taken a break.

The group said: “There is no way of knowing how banks will view or interpret that information in the medium to long term…. Every lender uses their own algorithms and underwriters to work out whether or not they want to take the risk of lending to someone.”

A spokesman for Springtide said: “Payment holidays are crucial for many people whose incomes have been affected by this pandemic and their introduction came as a big relief, but we are aware of many people who are not in any particular financial difficulties making enquiries about them.

“They often see it as an opportunity to improve their cash liquidity or to get ‘free money’ and have applied to their lenders, unaware of the potential consequences, when in fact switching to interest-only might have been a more appropriate move.”

James Chisnall, director at City Finance Brokers, agreed that some borrowers were taking holidays without necessarily needing them.

He told Mortgage Solutions that he hoped landlord borrowers were passing on savings to tenants, and he was surprised lenders were not asking landlords to offer some form of proof of finances.

He added: “For a landlord to take it they should have to prove to their mortgage company they are not taking rent from their tenant.”

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