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Mortgage payment holidays ‘set to be extended by several months’ as Rishi Sunak plans to ease financial strain on Brits

MORTGAGE payment holidays are reportedly set to be extended by several months as Rishi Sunak plans to ease financial pressure on Brits.

The chancellor announced in March that lenders had to offer three-month mortgage repayment holidays to coronavirus-struck households.

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 Chancellor Rishi Sunak is reportedly set to extend mortgage payment holidays
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Chancellor Rishi Sunak is reportedly set to extend mortgage payment holidaysCredit: Getty Images - Getty

Some 1.7million payment freezes have been granted so far, according to banking trade body UK Finance - accounting for around one in seven UK mortgages.

Regulator the Financial Conduct Authority (FCA) and UK Finance have both confirmed they're looking at what will happen once mortgage payment holidays end in June - with some suggesting freezes could last 18 months.

But now the chancellor is formally drawing up plans to extend the period for those who are still struggling financially, reports the Financial Times.

According to the paper, ministers are under pressure to extend the scheme - potentially for another three months - to give borrowers the chance to delay payments without impacting their credit record.

Will a payment holiday affect your chances of getting a new mortgage?

IT'S up to individual lenders to decide whether or not they take into account a coronavirus payment holiday when considering a mortgage application.

Although they can't see a payment break on your credit score, they may use other methods such as Open Banking where it will show up.

Here's what the banks have said they will do, according to MoneySavingExpert:

  • Barclays

Barclays has said that it won't necessarily use information of a payment holiday due to the pandemic when assessing a new mortgage application.

For example, a payment holiday with another lender won't have an impact on your mortgage application.

  • Bank of Scotland, Halifax and Lloyds

All three banks are owned by Lloyds Banking Group. They've said that it will take payment breaks into consideration when deciding whether to lend to you, even if you took it out due to the coronavirus crisis.

  • NatWest and RBS

Both are part of the same banking group, Royal Bank of Scotland. The policy here is that a coronavirus payment break would be considered but having one itself wouldn't prevent someone from being approved a new mortgage.

One of the chancellor's allies stressed, however, that no final decision has been made by the government. It is believed a formal announcement will be made in coming days after banks and government figures hold talks.

Banks want the FCA to let them extend the programme for Brits who are still struggling during the pandemic.

However, not all banks are keen on offering an extension to all homeowners, with one banker telling the paper: "Those that can afford to cover their borrowing should do so."

At the beginning of the outbreak, banks agreed to help Brits by offering them payment holidays which could help save households on average £755 a month.

But homeowners have been warned that mortgage holidays could end up costing them £2,769 in higher repayments.

Last week, it was reported that mortgage borrowers could be split into three groups.

The first are those who can return to normal repayments after three months, the second have a good history of repayments but need the freeze extended in the short-term, and the third are those with no real prospects of repaying who may need debt advice.

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The Times reported the measures were currently being looked at by the FCA in a bid to prevent borrowers from defaulting and homes from being repossessed.

It follows the Bank of England warning that 1.5million jobs could be lost as the UK faces worst its worst ever recession.

One banker told The Times: “The last thing everyone wants is a repeat of the 1980s and 1990s, kicking families out onto the streets.”

HM Treasury declined to comment. You can use MoneySuperMarket's mortgage holiday calculator to work out how deferring payments will affect you. And here's how to apply for a mortgage holiday if you're struggling.

Chancellor Rishi Sunak announces mortgage lenders to offer three month break in bills for coronavirus-hit customers