Coronavirus mortgage holidays

Many people are experiencing financial issues because of COVID-19. To address this, lenders have been offering mortgage repayment holidays. We explain how these work and what the options are now that the deadline for applying for a mortgage repayment holiday has passed. 

Many people are experiencing financial issues because of COVID-19. To address this, lenders have been offering mortgage repayment holidays. We explain how these work and what the options are now that the deadline for applying for a mortgage repayment holiday has passed. 

Please note: The information in this article was correct at the time of publication on 13 April 2021 but, because of the impact of COVID-19, things can change. We aim to keep this page updated, but please check with your mortgage provider or potential provider directly to confirm any details. 

Mark Gordon
From the Mortgages team
4
minute read
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Posted 13 APRIL 2021

What is a mortgage holiday?

A mortgage holiday is a break from making mortgage repayments for a set amount of time, which a customer agrees with a lender. In March 2020, as part of its package of measures to support people affected by COVID-19, the government agreed with mortgage lenders that they would offer three-month repayment holidays to households having financial difficulties because of the pandemic. The scheme was then extended, giving people the option of reducing or pausing their monthly payments for up to six months in total.

The deadline for applying for a mortgage holiday was 31 March 2021. So if you applied for a mortgage holiday before that date, it must end by 31 July 2021. However, if you’re still having difficulties – whether or not you’ve already had a payment holiday – lenders should offer you individual support, which could include a (further) payment deferral.

Lenders should only take steps to repossess your home as a last resort.

The options to defer payments also extended to landlords whose buy-to-let mortgage payments were affected by tenants having financial difficulties because of COVID-19. Landlords must have given renters six months’ notice if they want to end a tenancy and can’t start court proceedings until this has ended. Evictions can only be carried out in certain circumstances until 31 May 2021.

What should I do if I’m having problems paying my mortgage?

Whether or not you’ve already had a mortgage holiday, if you’re having difficulties making your repayments because of COVID-19 or think you will do, it’s best to get in touch with your lender as soon as possible.

Lenders should offer ‘tailored support’ to people experiencing difficulties. This could include:

  • a payment holiday for a limited time
  • making reduced payments for a limited time
  • changing your mortgage term.

Will I be able to overpay in the future?

That might be possible, depending on your lender and your mortgage, but not all mortgages allow overpayments. If you do make overpayments, you might have to pay significantly more if your mortgage only has a short amount of time left to run. Your lender may also offer the option of extending the term (length) of the mortgage, or might allow you to make interest-only or capital-only repayments for an agreed period. Ask your lender about this when you arrange any tailored support.

If I’m offered a mortgage holiday as tailored support, what happens to the end date of my mortgage?

Some lenders might offer to make a short extension to the term of your mortgage, which will push back the end date. If your lender offers this, then think carefully about how this would affect your finances before deciding whether this is right for you.

What if an extension to my mortgage takes me beyond retirement age?

It might not be a problem if your retirement date is flexible. But if your mortgage continues after you’ve stopped working, your lender will want to look at whether you can still make the repayments. If you’re concerned, discuss this with your lender to find a course of action that’s right for you.

How will a mortgage holiday affect my credit history?

Payment holidays under the original payment deferral scheme shouldn’t impact your credit score. You can always check your credit file, just to make sure. However, a payment holiday might affect your ability to get credit in future, as lenders take a range of information into account when deciding to lend.

If you have a payment holiday as part of tailored support, this will be recorded on your credit file.

What else do I need to know about mortgage holidays?

It’s important to understand that you will still owe the amount you didn’t repay during the mortgage holiday or during a period of making reduced payments. And interest will also continue to be charged on what you owe, unless your lender tells you this isn’t the case. So, when the holiday ends, you’ll need to make up the payments you’ve missed.

The Financial Conduct Authority (FCA) says that payment holidays should only be taken when absolutely necessary and that if you’re able to keep paying your mortgage, it will be in your best interests to do so.

Talk to your lender about your options and think about the overall impact on your finances to help you make a decision that’s right for you.

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