Mortgage Payment Holiday Ends: What Did We Learn?
Now that the mortgage payment holiday period has ended, it seems appropriate to take a retrospective look at the scheme and the confusion (still) surrounding it.
How Long Was the Mortgage Payment Holiday?
The maximum number of months that someone could pause their monthly mortgage repayments for was 6 months. Even when the government extended the scheme until 31 March 2021 after the second lockdown, this timeframe remained the same.
Those who had already taken a six-month payment holiday were not eligible for a further mortgage payment holiday. Those who had not yet taken a payment holiday could apply for one up to 31 March. And finally, those who were currently on a payment holiday (or had previously taken a partial one) were also able to extend it up to 31 March.
Notably, all payment breaks had to end by 31 July 2021 and the months that you could take did not have to be consecutive.
Did My Lender Have to Give Me a Mortgage Payment Holiday?
Payment holidays were available to UK homeowners who were up to date on their mortgage payments. However, homeowners did not automatically qualify for the mortgage holiday scheme; rather, they had to demonstrate that their income had been directly or indirectly affected by the coronavirus.
Initially, many homeowners that applied for a payment holiday were awarded 3 months. If they wanted to get the full 6 months, they had to actively request an extension.
The Oversights of the Scheme
Whilst mortgage holidays provided a vital lifeline to borrowers facing financial difficulty, they did not solve any long-term problems that some homeowners were/are facing due to the pandemic. In fact, because the scheme’s guidelines were so convoluted and unclear, it might have made many struggling homeowners’ situations worse.
Even though the Financial Conduct Authority (FCA) stated that payment holidays would not be reported as a missed payment on your credit file, they did not explain that your ability to access credit could still be affected in the future. This is because lenders could easily infer that the “gaps” in your payment history were the result of financial struggle, and therefore they might be less likely to accept your credit request.
Many of our clients were surprised that their lender did not consider any of the past 12 months as a payment break or holiday. Instead, lenders attributed all missed payments to the homeowners’ mortgage arrears balance.
Additionally, many homeowners that initially applied for a payment holiday for 2 or 3 months assumed that it would be extended up to 6 months automatically. In reality, they had to directly request an extension.
We have also dealt with clients who were unaware that the government’s “extension” of the scheme only applied to the period for support, rather than the maximum timeframe (6 months) that you could be provided with support. Therefore, they had incorrectly assumed they were able to extend their payment holiday after they had already spent 6 months on it.
Was It Really a “Holiday” Then?
The term “holiday” was undoubtedly a misleading way to describe the nature of the scheme. Payments were deferred, not skipped. The number of payments deferred under the scheme will be calculated by lenders. Homeowners will then have to repay this amount over the remaining term of the mortgage, which will both increase monthly payments and affect any current agreement already in place to repay previous arrears.
There will certainly be many negotiations taking place over the next year, with a lot of confused customers trying to make sense of what their lender has decided on their behalf.
Who Can I Complain to?
The FCA is currently looking into measures that will keep borrowers from defaulting and getting their homes being repossessed. However, you will not be able to complain about your lender to the FCA as they do not speak to customers.
Any complaint about how your lender has administered your mortgage has to be dealt with by the Financial Ombudsman Service (FOS). This process often takes a long time, with your lender typically given 8 weeks to respond to your initial complaint.
Importantly, the FOS is overruled by the courts and your lender knows this. This means that if your lender gets a head start on your case and they are awarded with possession of your home, the FOS will not attempt to overturn any repossession action that your lender has taken.
Our Final Thoughts
For there to be so much confusion surrounding mortgage payment holidays, clearly the conditions and stipulations of the scheme were not communicated well enough to the public.
If you are currently struggling with mortgage payments, the government’s Support for Mortgage Interest (SMI) scheme could help you. However, the loan scheme takes 39 weeks to kick in and is only available to those on benefits.
In any case, contact us if you require expert advice and need us to help stop the repossession of your home.