Mortgage payment holidays: what you need to know
In March, the UK Government announced that homeowners could apply for three month mortgage payment holiday. The first of these were due to finish in June but in May the UK Government announced that these could be extended by another three months. The application deadline has also been extended to the end of October.
UK Finance has revealed that the number of payment holidays in place more than tripled in the two weeks between 25th March and 8th April, with around 61,000 being granted each day.
But how do they actually work? Our expert independent mortgage advisers at ESPC Mortgages answer some commonly asked questions about mortgage payment holidays in this article.
What is a mortgage payment holiday?
A mortgage payment holiday is when your monthly mortgage repayments are paused for a certain period of time. Under the financial assistance measures announced by the government, those struggling with financial difficulties due to Coronavirus COVID-19 can ask their lender for break in mortgage repayments.
Who is eligible for a mortgage payment holiday?
The mortgage payment holiday scheme has been put in place to homeowners who are struggling financially due to the ongoing Coronavirus COVID-19 pandemic. It is available to homeowners who are up to date on their mortgage payments.
It has also been extended to landlords and buy-to-let property owners whose tenants are struggling to pay their rent due to financial difficulties. Landlords who take a mortgage payment holiday are expected to pass this financial relief to their tenants.
You should speak to your lender directly if you are concerned about your finances and wish to take a mortgage payment holiday, and they can advise on next steps.
Is a mortgage payment holiday a good idea?
A mortgage payment holiday is useful for households struggling with their month-to-month budget, as a break in mortgage repayments may help to ease financial pressures in the short term.
However, it should be noted that if you defer your mortgage payments, you will pay more interest over the term of the mortgage. Your monthly payments are also likely to increase slightly after a mortgage holiday as, due to the accrued interest, the balance of your mortgage is likely to have increased.
Will a mortgage payment holiday affect my credit rating?
No, at present a mortgage payment holiday should not affect your credit rating. On 31st March, the credit reference agencies Experian, Equifax and TransUnion confirmed that homeowners will have their credit scores protected when they take out a mortgage payment holiday.
How do I apply for a mortgage payment holiday?
If you wish to apply for a mortgage payment holiday, you should speak to your lender directly. They will be able to advise you further.
David Lauder, Independent Mortgage Adviser with ESPC Mortgages, said: “We are still offering advice and helping homeowners and buyers with their mortgages where possible. As a team of independent mortgage advisers with many years of experience in the industry, we can help to guide clients through this unprecedented situation.”
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The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain. No individual mortgage advice is given, nor intended to be given in this article.
The initial consultation with an ESPC Mortgages adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £350 (£295 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.
ESPC (UK) Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is authorised and regulated by the Financial Conduct Authority.