He added the industry, through trade body UK Finance, was discussing with consumer groups, regulators and the government, plans to support borrowers at the end of payment holidays.
Hammerstein was giving evidence to the Treasury Select Committee of MPs along with other senior representatives of the major UK banks.
Scottish National Party MP Alison Thewliss questioned whether lenders wanted something different after three months, rather than just an extension of the measures.
Hammerstein said: “My suspicion is that continuing to extend payment holidays isn’t going to help the individual borrowers, nor is it going to help the overall economy as we get to a place where we bridge from the healthcare crisis that we’ve been in so far into whatever the secondary economic consequences of that might be.
“So finding mechanisms to deal a little bit more carefully if you will with the specific circumstances that individuals find themselves in is going to be a very important part of whatever the next phase of the solution, as an industry along with regulators and consumer groups, we come up with to help support those individuals.”
Different tactics required
Hammerstein earlier noted that the payment holidays were predominantly a means of providing breathing space for borrowers to understand how they would be affected by the crisis.
He added that the most important element of the payment holidays was not financial, but that it removed the risk of customers suffering an adverse credit rating for missing payments, which could have long-term implications.
“So as we proceed through the crisis we get the government schemes in terms of the furlough and self-employed support in place, then we can hopefully build the capacity [for forbearance discussions],” he continued.
“That will still require some different tactics and different plans relative to pre-crisis to then work carefully with those individuals who have a significant impact on their ability to service the debt obligations they have.”
Long-term impact
Mortgage Solutions understand that lenders are aware that Covid-19 is likely to have a long-term impact on some customers’ financial situation.
As a result, they are looking for options for those who may need further support at the end of the three-month payment holiday period, in addition to those that have already been made available.
A UK Finance spokeswoman told Mortgage Solutions: “UK Finance is working with the government and regulators to find the best solutions for all as the crisis continues.
“There is a range of support available such as payment holidays, extended or automatic overdrafts or support for other types unsecured debt, including credit cards.
“All providers are ready and able to offer support to their customers who are impacted directly or indirectly by Covid-19.”
