Mortgage borrowers are to be given a payment holiday of up to three months if they hit financial difficulty because of coronavirus.
The measure will also be available to buy-to-let landlords, including those struggling to pay the mortgage because their tenants are struggling to pay the rent.
The measure was announced yesterday by Rishi Sunak, the Chancellor.
Trade body UK Finance welcomed the move.
CEO Stephen Jones said: “Mortgage lenders will support customers who are experiencing issues with their finances as a result of COVID-19 and the options include a payment holiday of up to three months.
“Monthly mortgage payments tend to be the largest outgoing for the vast majority of households, and lenders are keen to reassure home owners that the industry is working hard to put measures in place to support them during these uncertain times.
“Customers who are concerned about their current financial situation should get in touch with their lender at the earliest possible opportunity to discuss if this is a suitable option for them.”
However, Rob Griffith, director of the newer body the Mortgage Market Alliance, warned: “Mortgage borrowers who wish to accept a mortgage holiday from their lender need to be fully aware of the detail of such an arrangement and what it actually means for their mortgage payments, the length of their term, and how this might appear on their credit file.
“This is not the lender paying the borrower’s mortgage for them for a three-month period but a deferment of these mortgage payments into the future.
“With that being the case, borrowers should get the detail of any such arrangement and use their mortgage adviser to provide an explanation of what this actually means for them, and to understand what (if any) other options might be available.”
No rent holiday measures have yet been unveiled, but more emergency coronavirus-related announcements are expected.
Comments (4)
I assumed that the payment holiday would basically add the three months on to the term of the mortgage, so rather than 25yrs and 6 months, it would be 25yrs and 9 months?
Slightly concerned about the impact on the credit file though… How and why would that be affected? It’s not that you are not paying it when requested, the lender is not requesting for 3 months? And how large an impact is it likely to have?
Our management portfolio and commission will be our rock through this awful period covering most of our overheads. If tenants are told they don’t have to pay rent, how do we collect our management commission and keep staff paid etc?
Simple answer…assume a six month period with ZERO income. If you don’t have cash reserves to cover costs over a six month period (WCS)…you should be speaking to your bank.
Make no mistake, we will ALL be affected (to differing levels by this narrative).
Stay well folks!
Rent holidays for tenants presumably would be a deferment but the problem will be tenants are unlikely to be able to make up rental payments. For landlords if they have a mortgage deferral for 3 months may be an option. The problem arises where landlords hold investment property as a pension to meet their own liabilities. Simplistic politicians like Corbyn and much of the press assume landlords are wealthy people and can take the knock. This is often not the case. I guess tenants should be looking to the state to claim the appropriate benefits like housing benefits to mitigate their own position as otherwise arrears could lead to evictions. The whole thing is interrelated.