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Mortgage payment holidays and ban on house repossessions extended for THREE more months

HOMEOWNERS will be offered an extra three months' mortgage repayment freeze taking the total to six months so far.

Proposals to extend repayment holidays have today been announced by HM Treasury as we approach the end of the first three-month freeze.

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Mortgage repayment holidays can be extended for three months
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Mortgage repayment holidays can be extended for three monthsCredit: Getty - Contributor

Over 1.8million mortgage payment holidays have so far been taken up since the scheme was first announced by chancellor Rishi Sunak back in March.

In addition, the government says homeowners will now have until October 31 to ask for a three month freeze (not a six month freeze) if they've not taken one up already.

Also on the cards are plans for lenders to offer lower repayments instead of a complete payment freeze.

Meanwhile the current ban on properties being repossessed will continue until October 31.

Mortgage help being offered

HERE'S what's planned for struggling mortgage borrowers - these proposals are expected to be confirmed by the city watchdog shortly:

  • Borrowers who can afford to return to full repayment should do so - at the end of a payment holiday, firms should contact customers to find out if they can resume payments and if so, agree a plan on how the missed payments will be repaid.
  • Anyone who continues to need help gets help - lenders should continue to support customers who have already had a payment holiday where they need further help. Firms are expected to find out what borrowers can re-pay and, for those who remain in temporary financial difficulty, offer further support. As part of this firms should consider a further three-month payment holiday.
  • Extend the time the scheme is available to people who may be impacted at a later date – customers that have not yet had a payment holiday and who are experiencing financial difficulty will be able to request one until October 31, 2020.
  • Keep a roof over people’s head  – the current ban on repossessions of homes will be continued to October 31, 2020. This will ensure people are able to comply with the government’s policy to self-isolate if they need to.
  • Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. But credit files aren’t the only source of information which lenders can use to assess creditworthiness.

The guidance is expected to take place shortly following a consultation, which will end on May 26.

Plans to extend mortgage repayment holidays were first mooted earlier this week, although some experts had thought HM Treasury would extend mortgage repayment holidays by up to 18 months.

What do the changes mean?

When the new measures come into force, lenders will be expected to contact customers coming up to the end of their payment freeze to discuss their options.

If borrowers can start making repayments at their normal rate this is encouraged, as putting off repayments for longer will see future repayments increase and you'll end up paying more in interest too.

Another option for those able to make repayments will include extending the term of the mortgage so monthly repayments fall, although this will mean you end up paying more interest over the life of the mortgage.

For those who are still struggling, lenders will be able to offer an extra three months' repayment freeze or lower repayments.

Another option is allowing borrowers to temporarily switch to an interest only mortgage where you only repay the interest and don't make any payments towards the capital itself.

Lenders can also reduce or waive interest payments, as well as consider signposting customers towards sources of debt advice. 

City watchdog the Financial Conduct Authority (FCA) says payment holidays and partial payment holidays offered should not have a negative impact on credit files, although they may stop you from getting a mortgage despite not affecting scores. 

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.

'Help is there'

Economic secretary to the Treasury, John Glen, said: “Everyone’s circumstances will be different, so when homeowners can pay some or all of their mortgage, they should work with their lender on a plan; but if they are still struggling, I want them to know that help is there.”

Christopher Woolard, interim chief executive at the FCA, added: “Our expectations are clear – anyone who continues to need help should get help from their lender.

"We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.”

Martin Lewis explains how the costs can quickly mount up on mortgage holidays
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