Data from UK Finance has shown that more than 1.2 million homeowners have taken out mortgage payment holidays since the chancellor’s announcement.

Under the government’s new policy, homeowners can apply for a deferral of payments for up to 3 months.

This could provide much needed help to mortgage holders who are feeling the effects of COVID-19, but it won’t be suitable for everyone and it won’t be free money. Homeowners who aren’t concerned about their ability to pay should continue with their repayments as normal. We have prepared the following guide to make sure you know the facts.

Don’t Cancel Your Direct Debit

Cancelling your direct debit is not a payment holiday and will be counted as a missed payment if it has not been agreed with your lender. You should not cancel your direct debit without speaking to them first. A missed payment could show up in your credit file and may impact your ability to remortgage in the future.

Apply Online

Many mortgage holders have found it frustrating trying to get through to their lender as call volumes have put pressure on their staffing resources. It is recommended that if you are experiencing payment difficulties due to coronavirus, you apply for a payment holiday through your lender’s website.

There will be a fast track approval process in place and you won’t need to provide evidence or have an affordability test. So, you should get a quick decision.

Any unpaid interest will probably still need to be paid back but you won’t have to worry about any additional fees or charges.

Individual credit ratings should not be affected but if you are worried you should speak with your lender.

Not a good option for everyone

Although Mortgage payment holidays can be a good short-term solution during the current pandemic, there are several important things that you should bear in mind before taking a payment holiday:

• It is not suitable if you can’t afford your mortgage payments because your household income has reduced permanently. In these circumstances, we would urge you to get in contact with us so we can review your situation and provide you with the appropriate advice.
• While you are not making mortgage payments, you’re still racking up interest on your remaining mortgage balance. You’ll still owe the bank the same amount as you do now, but with interest added on. This means it will take you longer and cost you a little more to clear your mortgage.

Mortgage Holiday Payment Calculator

You can use this Mortgage Holiday Payment Calculator to understand what impact a mortgage holiday will have on the term of your mortgage. It helps to show you the increased amount/number of mortgage payments you’ll need to make once your mortgage holiday is over.

We can’t stress the importance of understanding how a mortgage holiday can affect your future repayments. If you have any thoughts, concerns or queries, we are here to support you as your mortgage & protection adviser.

To speak to a free Mortgage expert Click Here

HMRC have updated their guidance to confirm that they will aim to contact all those who are eligible for Self Employment income support by mid May and invite them to make a claim with payments made by early June 2020.

As yet there has been no update for those of you who became self employed during 2019/20 and therefore may not currently meet the criteria.

Just to recap, you may be eligible for the Self Employment Income Support Scheme if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Self Assessment tax return for the tax year 2018 to 2019
• traded in the tax year 2019 to 2020
• are trading when you apply, or would be except for coronavirus
• intend to continue to trade in the tax year 2020 to 2021
• have lost trading profits due to coronavirus

You will need to confirm to HMRC that your business has been adversely affected by coronavirus. HMRC will as usual use a risk based approach to compliance.

Your trading profits must also be no more than £50,000 and more than half of your total income for either:

• the tax year 2018 to 2019
• the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

Full details of the scheme can be found by following this link

For a Brighton Mortgage broker, Click here

There is good news about Mortgage Availability with Lockdown as the UK’s top lenders are reintroducing their mortgage offers, making it easier to get a home loan as lenders find ways to operate during Covid-19 lockdown.

Mortgage Availability with Lockdown, Nationwide, Halifax, Virgin and Santander have made it easier for people to qualify for a loan. This is much welcomed news for prospective buyers who have been stuck in a world of limbo. Halifax and Nationwide are both now accepting mortgage applications at 85% LTV which means that you need a 15% deposit on the deposit that you want to buy.

Virgin Money began offering purchase mortgages again, as Santander increased its maximum loan size from £300,000 to £500,000 and cut fees on its residential mortgages.

Lenders have been changing the way they operate to cope with the lockdown and are now much more reliant on their IT systems. Through the use of virtual property valuations, lenders are adjusting to lockdown restrictions which has allowed them to reopen their temporarily closed doors.
There are now an increased number of options available to you if you are looking to purchase or remortgage. With The Bank of England’s base rate at its lowest levels in history, it could be a good time for you think about your current financial arrangements. We could be able to get you a better deal with a different lender to lower your monthly mortgage payments or allow you to raise additional capital.

In its package to help people who have had their circumstances changed as a result of Covid-19, the Chancellor announced a series of measures to alleviate the financial impact of losing a job or self-employed income including a Mortgage payment holiday.

One of these was the option to take a mortgage payment holiday. But what is it and how does it work? We’ve created a guide that explains it in more detail. The first thing to say is that calling it a holiday isn’t strictly true. The payment holiday was originally designed for customers who had fallen on hard times and couldn’t afford their monthly mortgage. The Lender would talk through the customer’s circumstances and then agree, if there was a way forward, to suspend the direct debit for three months whilst the customer sorted themselves out. In the background, the lender would add the missed payments, plus the interest payable onto the mortgage and then when the payments started again, the monthly amount would be higher to take into account in the increased in the mortgage. The customer’s credit report would show three missed instalments and therefore the payment holiday would have a negative impact on the customer’s ability to obtain credit in the future certainly at high street prices.

What has changed?

To have a payment holiday under the COVID-19 measures, you don’t need to be financially distressed and the link between your payments or should we say lack of them with a credit referencing agency is broken. This means that there should be no impact on your credit score if you choose to take a holiday. Instead, your mortgage payments after the 3-month holiday will go up to make sure you repay the mortgage amount plus any interest in full.

A word of warning

If you are coming to the end of a fixed rate or other such mortgage deal, a time when your mortgage would normally drop back on to a higher rate of interest, then normally your lender would offer you another deal to encourage to keep your mortgage with them.  This is sometimes called a rate switch or product transfer and is normally a similar rate of interest to what you would be have been paying under your current deal.  However, some lenders are not in a position to offer the new lower rate if you are currently taking a payment holiday. You could attract a higher rate of interest on your outstanding loan which is then added to your mortgage and not be able to do anything about it. So, when it comes to your payment holiday, timing is everything. Of course, if you choose to take a payment holiday and then cancel your direct debit you run the risk of defaulting on your mortgage which is a risk that could damage your ability to obtain a competitively priced deal in the future.  

Talk to an expert

Taking a payment holiday is a decision which should not be taken lightly, if the implications are not understood then over time it could end up costing more money than it looked to save in the first place.  Talk to us and we can help you understand what a payment holiday means for you and when would be the right time.  And, if it’s something you still want to do, how to go about requesting a suspension of your mortgage payments from your current lender – each has their own way of doing things and different turnaround times. So, the message is simple, act if you need to, make sure your take expert advice first, and let us help today so you have the right result every time.


https://www.fca.org.uk/consumers/mortgages-coronavirus-consumers