Mortgage holiday extension ‘exacerbating’ non-bank lenders’ funding woes

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  • 28/05/2020
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Mortgage holiday extension ‘exacerbating’ non-bank lenders’ funding woes
The extension of mortgage payment holidays will exacerbate funding issues and operational difficulties for non-bank and specialist lenders, UK Finance has warned.

 

The trade body warned it was now “vital” that these lenders could access government schemes to continue to support their customers.

It highlighted that customers of these lenders were often self-employed, vulnerable, or had specialist financing needs and were more likely to have taken a payment deferral.

Trade bodies including UK Finance, the Finance and Leasing Association (FLA) and Intermediary Mortgage Lenders Association (IMLA) have already proposed possible solutions to HM Treasury and regulators at the Bank of England.

However, despite saying discussions were continuing, HM Treasury has made no further move to support the sector.

The issue was raised again as part of UK Finance’s response to the FCA proposals for extending mortgage payment holidays, with the trade body emphasising the urgency of the matter.

“In extending payment deferrals for a further four months both in terms of granting payment deferrals to customers who have already had one and allowing new payment deferral applications, it is important that the authorities consider the impact on, and provide the appropriate support to, the non-bank sector,” UK Finance said.

“Non-banks cannot currently access government support schemes to support residential and buy-to-let lending and are unable to access their core funding source given the disruption to securitisation markets and a likely reduced appetite by banks to provide wholesale finance to non-bank lenders.

“The non-bank sector is supportive of helping its customers, many of whom are self-employed, vulnerable, or who have specialist financing needs through the crisis and have done so to date without government support.”

 

Difficulties will be exacerbated

It added that “as payment deferrals continue, funding issues and operational difficulties will be exacerbated”.

These include the need to negotiate waivers on existing funding facilities and conditions as a result of offering or extending such payment deferrals.

UK Finance noted that “serving the significant cohort of customers who have specialist financing needs that cannot be met by high street banks and building societies will become more difficult.”

It concluded: “It is vital that authorities now allow non-banks to access government support schemes to ensure they are ready and able to continue to support customers, who otherwise may not be able to access mortgage, cards or specialist products from (high street) bank lenders, as we move towards recovery.”

 

 

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