HOMEOWNERS who are struggling to pay their mortgage because of the coronavirus crisis can now pause their payments until July 2021.
The extension will be available for any household that hasn’t already had a payment break of more than six months.
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If you’re on a payment holiday at the moment, and it was due to last for fewer than six months, you’ll be allowed to extend it.
Households that have already paused their mortgage payments for six months won’t be entitled to another break.
Instead, lenders are being asked to provide tailored support – although this could be reported on your credit file.
Homeowners will have until 31 March 2021 to apply for a payment holiday, or an extension of a previous payment break.
What is a payment holiday and should you apply for one?
PAYMENT holidays are when a lender agrees to pause your monthly repayments for a set amount of time.
This has to be agreed in advance, so don’t stop making your repayments until your bank has given you permission to do so.
The majority of lenders are now offering payment holidays, so get in touch with your bank to find out what help it can give you.
Most of the time, it’ll require you to fill out an online form.
Typically, payment holidays are offered in extreme circumstances and are designed as an emergency measure to help you through a difficult financial time.
If you think you need to take one, you should speak to your lender to discuss your options – but do note that the break in payments doesn’t remove any debt or financial obligations.
Most lenders will also still charge interest during this time, so be aware that these costs will keep building up.
You should also always continue to make your normal payments if you’re financially able to.
Sue Anderson, head of media at debt charity StepChange, said: “If you can continue to make your normal payments without difficulty, then you should.
“Any temporary measures being offered by lenders don’t remove financial obligations – they are designed as an emergency measure to help you get through a period where your income may have taken a serious knock.
“However, if you need to use them then you shouldn’t hesitate to talk to your lenders.
“While taking a payment break would usually be noted on your credit file, the credit reference agencies have confirmed that, during the current crisis, this should not have a future influence on your credit status.”
After this date, mortgage payers can still extend existing payment breaks until 31 July 2021.
The new support was confirmed today by the Financial Conduct Authority (FCA) and is due to come info force from November 20.
The FCA first announced it was planning on asking lenders to extend mortgage holidays in an update earlier this month.
A payment holiday that’s taken as part of these proposals won’t be reported as missed payments on your credit file.
However, lenders can still see whether you’ve paused any payments through other methods, like Open Banking.
They can then use this information to decide whether or not they will lend to you – meaning a payment holiday could still have an impact on your ability to borrow money in the future.
Tailored support – which could include waiving or lowering repayments – for those who aren’t eligible for a payment break will also be reported on your credit file.
It’ll be down to your lender to decide what support it can offer you.
MoneySavingExpert has previously warned that taking a payment break may actually stop you from getting a mortgage, even though they won’t affect your credit score.
Asking for a mortgage holiday shouldn’t be taken lightly – you should only really apply for one if you can’t afford your repayments.
This is because interest will continue to accrue during your payment break, which means your overall repayments will increase.
In fact, taking a mortgage payment holiday could cost you £2,769 in higher repayments.
Sheldon Mills, interim executive director of strategy and competition at the FCA said: “Today we have confirmed further support for borrowers struggling financially as a result of coronavirus.
“The announcement we have made today, ensures that the support offered through payment deferrals is as flexible and accessible as possible.
“This means borrowers will again be able to access payment deferrals up to a maximum of six months.
“However, if you are able to keep paying it will be in your best long-term interest to do so. Payment deferrals should only be taken when absolutely necessary.”
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Homeowners originally had until October 31 to apply for a mortgage payment holiday before the support was extended.
Payment holidays for loans, credit cards, car finance and pay day loans are also set to be extended.
These measures include having the debt interests and charges cancelled but it will be marked on their credit history.
I’m mortgage-free at 35 thanks to my savvy spending
