The guidance allows borrowers with interest‑only and part‑and‑part mortgages which have matured recently or are set to mature soon to delay paying off the capital sum and continue servicing the interest providing they are up-to-date.
Following requests from lenders, bridging deals will be excluded from the arrangements, as will unregulated buy-to-let and those classified under the Mortgage Credit Directive Article 3(1)(b).
“We agree that we should exclude bridging loans due to their short‑term nature and higher interest rates. It is unlikely to be in a borrower’s best interest to continue to pay interest for an extended period,” the FCA said.
“We confirm, however, that high net worth consumers remain within the scope of this guidance as they may be at risk of harm if current market conditions affect their ability to realise their repayment strategy.
“We can confirm the guidance only applies to regulated mortgage contracts, and not unregulated buy‑to‑let mortgages or MCD Article 3(1)(b) loans,” it added.
Interest rate change
The FCA also made a change to allow firms to charge borrowers the interest rate applicable under the existing contract.
The temporary guidance comes into force on 31 October 2020, and applies to eligible borrowers whose loans have matured between 20 March 2020 and will be maturing until 31 October 2021.
Lenders which have contacted eligible borrowers before this guidance comes into force, and agreed that they can delay repayment of their mortgage, do not need to contact them again under this guidance, provided borrowers were given the option to delay the repayment until 31 October 2021.
If the borrower chose not to make use of an extension of up to 31 October 2021 or longer then there is no expectation on the firm to contact them again to make them aware of this guidance.