Homeowners struggling to pay their mortgage due to Coronavirus will be able to extend their mortgage payment holiday for a further three months, the government has announced.
The Treasury has also extended the ban on home repossession till 31 October and has opened the application period for those still in need of a mortgage holiday till the same date.
Mortgage holidays were first announced in March, allowing people to defer payments without affecting their credit rating.
The break from payments was supposed to end for the first applicants in June, but the Treasury has now extended this for those who are struggling and need help.
However it encouraged those who can afford to re-start their mortgage repayments.
The deferred payments will still have to be paid back later on, so mortgage customers will face higher bills once the so-called holiday comes to an end.
“We’re doing everything we can to help people with their finances at this difficult time and that includes making sure people get the support they need with their mortgages,” said John Glen, the economic secretary to the Treasury. “That’s why we’re working with the banks and lenders to extend payment holidays if people need them.”
The Financial Conduct Authority (FCA) published a new draft guidance on Friday for lenders to follow that will set out options available to their customers.
When the guidance comes into force, following a short consultation, lenders will be expected to contact their customers whose mortgage holiday is coming to an end.
Some may be able to resume their full monthly payments, others may be able to pay a proportion of their monthly payment, or temporarily switch to an interest only mortgage, and others will opt to extend their mortgage payment holiday.
“Our expectations are clear: anyone who continues to need help should get help from their lender,” said Christopher Woolard, the interim chief executive at the FCA. “Where consumers can afford to restart mortgage payments it is in their best interests to do so. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers.”
The extension of the mortgage payment holiday scheme follows the announcement by the chancellor, Rishi Sunak, last week that he was extending the furlough scheme, where the government pays 80% of an employee’s wages up to £2,500, which is supporting 9 million workers on behalf of struggling firms.