FCA could extend mortgage payment holidays for coronavirus
It added that the guidance will be reviewed within the next three months and payment holidays could be extended if appropriate.
“We will review this guidance in the next three months in the light of developments regarding coronavirus and will issue amended guidance extending the period of the payment holiday if appropriate,” it said.
The regulator emphasised that those taking a holiday should see no impact on their credit score and that firms should not be investigating the reason for requesting the loan.
Borrowers currently in arrears should not be treated any differently to those who are fully up-to-date with their payments.
And lenders should be proactive in discussing a payment holiday if customers suggest they could potentially face payment difficulty.
The regulator added that it could take how firms used the payment holiday when it came to future enforcement cases.
In its published guidance, the FCA said: “A firm should give customers adequate information to understand the implications of a payment holiday, including the consequences (if any) for the total amount payable under the mortgage contract, the term of the mortgage contract and the amount of contractual monthly instalments.”
It added: “A firm may decide to put in place an option other than a three-month payment holiday, if it is appropriate to do so in the individual circumstances of the case and it is in the best interests of the customer.
“This could include a payment holiday of fewer than three months, if the customer requests a shorter payment holiday. This guidance does not prevent firms from providing more favourable forms of assistance to the customer, such as reducing or waiving interest.”
For repossessions, the FCA made it clear that firms should not commence or continue repossession proceedings against customers at this time, “given the unprecedented uncertainty and upheaval they face, and government advice on social distancing and self-isolation”.
This applies irrespective of the stage that repossession proceedings have reached and to any step taken in pursuit of repossession.
It added that where a possession order has already been obtained, firms should refrain from enforcing it.
“We consider that commencing or continuing repossession proceedings at this time is very likely to contravene Principle 6 and MCOB 2.5A.1R – absent exceptional circumstances (such as a customer requesting that proceedings continue),” it said.
“We will not hesitate to take appropriate action where necessary.”
Firms should also ensure that their customers are kept fully informed and discuss with them the potential consequential impacts of suspending any moves towards repossession.
Treat customers fairly
Throughout all this, the FCA highlighted that the guidance builds on obligations by firms under Principle six of its rules and MCOB 2.5A.1R to act in the interests of customers and treat them.
Interim chief executive Christopher Woolard said: “We want to help firms support consumers during these unprecedented times.
“Our mortgage guidance underpins the actions taken by mortgage providers and will give confidence to both consumers and firms. In particular, we are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time.
“Small businesses can be confident that their access to funds can be based on how their business has performed in the past and its future prospects – not its position today.”
Nearly 100 lenders change criteria after mortgage payment holidays announced
Knowledge Bank said the majority of these changes had been to allow mortgage holidays on products which previously did not have such conditions.
Some 32 lenders confirmed they will provide borrowers with a payment holiday, but most require the borrower to get in touch directly and have set up dedicated telephone lines and numbers to accommodate this.
Brokers will be able to access these numbers from Knowledge Bank’s Covid-19 Live Feed, however lenders are not currently permitting brokers to make contact on a client’s behalf.
Lenders have made use of different channels to allow borrowers to make contact, with Penrith Building Society inviting customers to get in touch through Facebook messenger.
The society said no financial details would be shared over the platform, but borrowers will be able to request a payment holiday and give a summary of their circumstances.
Chorley Building Society and Nationwide have provided forms that brokers and borrowers can download and send back.
Coventry Building Society, Ipswich and Together are allowing customers to self-certify that they have been impacted by Covid-19 with no further validation required.
Nicola Firth (pictured), founder and CEO of Knowledge Bank, said: “We will work with the lenders over the coming days and weeks to constantly keep the live feed updated with each lender’s approach and criteria.”
Limited company BTL included in mortgage holiday measures
Both trade bodies confirmed the details to Specialist Lending Solutions, noting that their member lenders would be taking this approach.
The intention of the buy-to-let measures announced last night, to match those for residential borrowers, is that any residential tenant should not be impacted by the situation.
However, commercial properties and business tenants are not covered by the mitigating factors.
Lenders who are not a part of either trade body will be taking their own approach to the situation.
Castle Trust told Specialist Lending Solutions it is considering any hardship on a case-by-case basis at the moment to help ensure it is providing the most appropriate support.
The lender added that it would keep the policy under review as the situation develops.
Protect landlords and tenants
UK Finance and the BSA published the key steps of how the mortgage payment holiday and moratorium on repossession and eviction activity will operate.
Commenting on the announcement, Nationwide director of mortgages Henry Jordan said: “As the UK’s second largest buy-to-let mortgage provider we feel it is important to extend protection to landlords and their tenants during this uncertain period.
“We have extended mortgage payment holidays to include rental properties so that landlords with tenants who are unable to meet rental payments because of coronavirus are protected as much as possible.
“These payment breaks will be able to be arranged via The Mortgage Works – Nationwide’s buy-to-let arm. We would encourage tenants to speak to their landlords if they are impacted or worried about coronavirus to ensure that steps can be taken to support them at this time.”
Bank of Ireland emphasised that payment breaks offered by the bank will not affect customers’ credit files held by credit reference agencies and that its support included mortgages provided through its partnership with the Post Office.
How the residential and buy-to-let mortgage payment holidays will work
Three-month payment holidays have been announced for all lenders that are members of UK Finance and the Building Societies Association (BSA), along with a moratorium on repossessions.
Lenders can offer a payment holiday of up to three months without the need to assess borrower circumstances and applications can be made on a self-certification basis.
However the trade bodies emphasised that landlords should pass on the relief to their tenants during this period.
Some of the biggest lenders have already set out details of how they will respond, including Lloyds Banking Group, NatWest, Barclays and Nationwide.
However, lenders may extend their flexibilities in different directions or under varying means.
UK Finance and the BSA have set out the underlying principles of how the schemes will operate for owner occupiers and landlords, but highlighted contacting the relevant lender as soon as possible was vital.
The key points
- A payment holiday will be available to all customers who are up to date on their mortgage payments.
- A payment holiday will also be available to all buy-to-let landlords whose tenants have lost income because of the impact of Covid-19. Landlords are expected to pass on this relief to their tenants to ensure that they are supported during this time.
- Customers will still owe the money where a payment holiday has been granted and interest will still accrue, so if borrowers are able to make part of the normal mortgage payment to reduce the money owed or interest charges then they should consider doing so.
- Firms will make every effort to ensure that the payment holiday does not negatively impact on borrower credit files.
- If already in arrears, borrowers should contact the lender as soon as possible. Lenders will review any change in circumstances to ensure that payments remain sustainable.
- If borrowers are already experiencing financial difficulty, lenders have also agreed a three month moratorium on residential and buy-to-let possession action, meaning that no homes will be repossessed at this difficult time.
What is a payment holiday?
With a payment holiday, borrowers will not have to make any monthly mortgage payments for a set amount of time, in this case up to three months.
However, it is important to remember that the money is still owed and the interest on the mortgage still accrues during a payment holiday.
At the end of the payment holiday the lender will be in contact to assess circumstances and agree a manageable way to repay the interest charges incurred and make up the deferred payments. Each lender will have a range of options to do this.
Who will be eligible for a payment holiday?
To be eligible for a payment holiday borrowers will need to be up to date on mortgage payments.
For buy-to-let landlords it will be available if tenants have lost income because of the impact of Covid-19.
There are a number of options available and payment holidays are not always the most suitable solution for everyone. By speaking to the mortgage provider, they can tailor the best option.
How to apply?
If borrowers are concerned about making mortgage payments they should contact the mortgage provider as soon as possible. Documentation is not required; borrowers will just need to self-certify that their income has been either directly or indirectly impacted by Covid-19.
Buy-to-let landlords will need to self-certify that their tenant’s income has been impacted by Covid-19. Landlords are expected to pass on this relief to their tenants to ensure that they are supported during this time.
At the end of the payment holiday the lender will make contact to assess circumstances and agree a manageable way to repay the interest charges incurred and make up the deferred payments. Each lender will have a range of options available to help you do this.
How long will it take to process an application?
Firms are doing their best to support their customers during these unprecedented times. However, the spread of Covid-19 is also having an impact on their own staff and applications will be dealt with as quickly as possible.
What will happen to credit scores?
Mortgage providers will make every effort to ensure that borrowers taking a payment holiday will not be negatively impacted on their credit score.
What happens for those already in arrears?
Lenders will make every effort to support people already in financial difficulty and will make this process as simple as possible. Mortgage providers have agreed to a three-month moratorium on residential and buy-to-let possession action, meaning that no homes will be repossessed at this difficult time.
What should tenants do?
Tenants should contact their landlord or managing agent if they have problems paying rent. For landlords whose tenants are unable to pay their rent, they should contact the lender as soon as possible to discuss the options that may be open.
Mortgage payment holiday extended to buy-to-let and Help to Buy
This will accompany legislation to ban new evictions being started during the coronavirus crisis and landlords are being told to work with tenants on affordable repayment plans.
The moves will be permitted by emergency legislation which will be “taken forward as an urgent priority”.
A statement from the Ministry of Housing, Communities and Local Government (MHCLG) called this an important step as it ensured parity of support, for private mortgage holders.
“Recognising the additional pressures the virus may put on landlords, we have confirmed that the three month mortgage payment holiday announced yesterday will be extended to landlords whose tenants are experiencing financial difficulties due to coronavirus,” it said.
“This will alleviate the pressure on landlords, who will be concerned about meeting mortgage payments themselves, and will mean no unnecessary pressure is put on their tenants as a result.”
Help to Buy
On Help to Buy borrowers those struggling to pay due to coronavirus will be offered interest payment holidays and other flexible payment strategies.
Help to Buy: Equity Loans are interest-free for the first five years so this change will apply to those who took out the loan before 31 March 2015.
Issues will be considered on a case-by-case basis but customers experiencing difficulty related to Coronavirus should first contact their main mortgage lender to discuss revised payment arrangements and then contact the equity loan administrator.
Homes England Help to Buy director Will German said the body was seeking to reassure borrowers that it will offer similar options to their main mortgage lender.
“We will do all we can to support Help to Buy customers through this unprecedented period of economic uncertainty,” he said.
“Like other lenders, we will offer payment holidays for those who are struggling to pay interest fees on their equity loans.
“We will also offer a range of flexible payment options to defer interest payment for a period. In all cases, we will seek to support households in difficulty.
“Please don’t struggle in silence. As soon as you think you might have difficulty making payments on your Help to Buy: Equity Loan account, get in touch – help is at hand,” he added.
No-one forced out
Housing Secretary Robert Jenrick MP said: “The government is clear – no renter who has lost income due to coronavirus will be forced out of their home, nor will any landlord face unmanageable debts.
“These are extraordinary times and renters and landlords alike are of course worried about paying their rent and mortgage. Which is why we are urgently introducing emergency legislation to protect tenants in social and private accommodation from an eviction process being started.
“These changes will protect all renters and private landlords ensuring everyone gets the support they need at this very difficult time.”
National Residential Landlords Association chief executive Ben Beadle added: “We recognise the exceptional circumstances and we will work collaboratively with government to ensure these measures protect both landlords and tenants.”
Barclays’ mortgage rescue package includes interest-only switch option
Following chancellor Rishi Sunak’s announcement that mortgage lenders would offer a three month holiday on repayments, the bank has confirmed it will offer other rescue measures, as well at the 90 day break, depending on the borrowers’ needs.
The bank said it would consider switching borrowers from capital repayment to interest-only for up to 12 months.
Further measures to help borrowers include an extension of the mortgage term to lower payments, and the availability of short and long term repayment plans for missed mortgage payments.
Borrowers who think they will face financial difficulty are being told to contact the bank to speak to one of its specialist support teams to discuss their options.
A Barclays spokesperson said: “As a responsible lender, it is crucial that we offer the right support to our customers at this time.
“We have therefore decided to offer customers who are potentially facing financial difficulty, a number of options to support them through this time.”
Before the chancellor’s address to the nation yesterday evening, Mortgage Solutions reported Lloyds Banking Group had pledged not to charge borrowers fees on missed mortgage payments.
That bank, along with NatWest, Nationwide and Barclays, have all confirmed taking a payment holiday will not leave a black mark on borrowers’ credit profiles.