On 20 March 2020, the FCA published new guidance for mortgage providers and for lenders taking part in the Coronavirus Business Interruption Loan Scheme. The new guidance clears up some of the uncertainties surrounding the Mortgage Holidays announced last week by the government.

Payment Holidays mean customers agree with their lender that they will not have to make mortgage holidays payments for a set amount of time. Payment holidays are designed to help customers when they may experience payment difficulties. In this case, because of the coronavirus situation.

Interim Chief Executive, Christopher Woolard said:

‘We want to help firms support consumers during these unprecedented times.

‘Our mortgage guidance underpins the actions taken by mortgage providers and will give confidence to both consumers and firms. Particularly, we are making it clear that no responsible lender should consider repossession as an appropriate measure at this time.

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The FCA says lenders should:

• Grant existing customers a payment holiday for an initial period of three months, where they may experience payment difficulties as a result of Coronavirus and where they have indicated they wish to receive one.

• Ensure that there is no additional fee or charge (other than additional interest) as a result of the payment holiday.
• Not include the holiday period on any assessment of a customer’s credit rating. 

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The guidance also sets out certain steps firms should take while making a payment holiday. They must ensure that the payment holiday does not have a negative impact on the customer’s credit score.

Since the FCA will review the guidance in the next 3 months in the light of developments regarding coronavirus. Hence, it will issue amended guidance extending the period of the payment holiday if appropriate.

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The FCA believed that repossession might not be in the best interests of the customer in these circumstances. As a result, repossession should not be continued unless the firm can demonstrate clearly that the customer has agreed it is in their best interest.

Thus, the FCA will continue to review these measures as the situation develops and update the guidance appropriately.

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