Mortgage holidays could be extended for a year – but how will this impact repossessions?
As of April 28, 1.6million payment holidays have been granted, according to banking trade body UK Finance – accounting for around one in seven UK mortgages.
The Times now reports that industry insiders are considering extending mortgage holidays by up to a year for some.
Online sources also report that it is thought borrowers could be split into three groups; the first are those who can return to normal repayments after three months, the second have a good history of repayments but need the freeze extended in the short-term, and the third are those with no real prospects of repaying who may need debt advice. This possible extension may leave many homeowners in an impossible situation once the holiday period elapses, with monthly mortgage payments increasing to unmanageable sums.
Measures are currently being looked at by regulator the Financial Conduct Authority (FCA) in efforts to prevent borrowers from defaulting and homes from being repossessed.
The FCA updated information on its website on 4th May, stating that “We are working with industry…” (mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators) “…to ensure customers remain supported”. Guidance remains vague and open to interpretation, however, it does appear that property repossessions will remain on hold during the current situation:
“Firms should not commence or continue repossession proceedings against customers at this time, given the unprecedented uncertainty and upheaval they face, and Government advice on social distancing and self-isolation. This applies irrespective of the stage that repossession proceedings have reached and to any step taken in pursuit of repossession. Where a possession order has already been obtained, firms should refrain from enforcing it.”
The FCA is yet to address how repossessions will be handled or enforced once mortgage holidays end, or once a successful coronavirus exit strategy has been carried out. It is unclear whether repossessions will remain suspended if mortgage holidays are extended.