The mortgage lenders agreed to support customers experiencing personal financial difficulties as a result of Coronavirus (Covid-19). They have announced a mortgage payment holiday for customers affected by covid-19.
All homeowners (unable to pay) will be able to claim three-month mortgage payment holiday because of Coronavirus.
Chancellor Rishi Sunak has claimed that all mortgage lenders will offer respite to homeowners who are struggling to pay.
“The payment holiday would mean that “people will not have to pay a penny” for their mortgage while they deal with the financial turmoil caused by Coronavirus.”
“Banks must offer these payment breaks to any customers who say they are affected by Covid-19. No repossession of properties can take place during the outbreak,” he added.
Banks including NatWest and Lloyds were among the first to react to the crisis and offered “payment holiday” to needy mortgage customers.
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How will the banks implement “Mortgage Payment Holiday”?
UK Finance, the trade body for the major banks :
After the chancellor pledged mortgage support for households affected by the coronavirus, UK Finance, set out how households can apply.
There will be a fast-track system for approval, but the payment holiday will not be granted to everyone. The customers will have to pay unpaid interest later, but individual credit ratings will not be affected.
“Firms will help customers the best way for the individual, but an automatic payment holiday may not always be the most suitable approach and may not be required by all customers,” said UK Finance.
The mortgage payment holiday will not constitute free money. The banks said they remain obliged under Financial Conduct Authority rules to ensure that any “forbearance” will still assume an eventual full repayment of arrears.
While a person is taking a payment holiday, the interest that would have been paid will still rack up.
But repossessions are extremely unlikely if someone fails to pay. “Forbearance needs to minimise the risk of possession,” said the banks.
Mortgage Payment Holiday – not a long-term solution – said UK Finance:
The banks admit the mortgage payment holidays are not a long-term solution but are designed only for a temporary income shortfall.
Due to a permanent reduction in income, a borrower is unable to afford anywhere near the full mortgage repayments. However, there is little prospect of an improvement in the situation in the foreseeable future.
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