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One in nine UK mortgages now subject to a payment holiday

The number of mortgage payment holidays in place more than tripled in the two weeks between March 25 and April 8, UK Finance said.

More than 1.2 million mortgage payment holidays have been provided to home owners whose finances have been hit by coronavirus, according to a trade association.

This equates to around one in nine (11.2%) mortgages across the UK now being subject to a payment holiday, UK Finance said.

For the average mortgage holder, the payment holiday amounts to £260 per month of suspended interest payments.

For a mortgage where chunks of the capital (the amount borrowed) and interest are normally being repaid, the average payment holiday equates to around £775 of deferred payments each month.

Lenders announced on March 17 that they would support customers facing financial difficulties due to the Covid-19 crisis.

People who are struggling to make their payments, perhaps because they have had a pay cut or their work has temporarily stopped due to Covid-19, can request a mortgage payment holiday of up to three months.

Payment holidays are available to customers who are up-to-date on their mortgage payments. People taking up this option will still owe the money and interest will still accrue.

Home owners applying for a mortgage payment holiday will need to self-certify that their income has been either directly or indirectly impacted by coronavirus.

UK Finance has said firms will make every effort to ensure payment holidays do not negatively impact on credit files.

The number of mortgage payment holidays in place more than tripled in the two weeks between March 25 and April 8, growing from 392,130 to 1,240,680. This is an increase of nearly 850,000 or an average of around 61,000 payment holidays being granted by lenders per day.

Stephen Jones, UK Finance chief executive, said: “Mortgage lenders have been working tirelessly to help home owners get through this challenging period. The industry has pulled out all the stops in recent weeks to give an unprecedented number of customers a payment holiday, and we stand ready to help more over the coming months.

“We understand that the current crisis is having a significant impact on household finances for people across the country. Lenders have a number of options available to help, and payment holidays aren’t always the right solution for everyone. We would therefore encourage any mortgage customers concerned about their financial situation to check with their lender so they can find out more information on the support available and how to apply.”

Robin Fieth, chief executive of the Building Societies Association (BSA), said: “We know that this is a difficult time for many home owners with a mortgage, and building society staff have been working hard to offer individuals the right solution. For almost quarter of a million so far, that has been a three-month payment holiday offering much needed breathing space to families whose household income is under severe pressure during the current crisis.”

UK Finance said telephone lines remain extremely busy so customers who are concerned about making their mortgage payments are advised to look at their lender’s website in the first instance, which will include the latest information on the support available.

Many lenders are offering customers the option to apply for a mortgage payment holiday through an online form on their website.

Lenders are also urging mortgage holders not to cancel their direct debits before a payment holiday has been agreed, as this will be counted as a missed payment and could impact their credit file.

Source: Express & Star

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Government extends mortgage payment holiday to BTL

The government has announced a raft of measures to protect renters and landlords during the Covid-19 crisis, including extending the three-month mortgage payment holiday to buy to let investors and stopping evictions.

Last night (March 18), the government confirmed that landlords will also be able to apply for a three-month payment holiday on buy to let mortgages under emergency coronavirus legislation.

This move has been welcomed by landlord organisations, the Residential Landlords Association and the National Landlords Association, which said the payment holiday “will take a lot of pressure off landlords enabling them to be as flexible as possible with tenants facing difficulties with their rent payments”.

As part of the legislation housing secretary Robert Jenrick also announced that private tenants could not be evicted from their homes for at least three months if they are struggling to pay their rent.

At the end of this three-month period, the government expects landlords and tenants to work together to “establish an affordable repayment plan” which takes into account tenants’ individual circumstances.

Mr Jenrick MP said: “The government is clear – no renter who has lost income due to coronavirus will be forced out of their home, nor will any landlord face unmanageable debts.

“These are extraordinary times and renters and landlords alike are of course worried about paying their rent and mortgage. Which is why we are urgently introducing emergency legislation to protect tenants in social and private accommodation from an eviction process being started.

“These changes will protect all renters and private landlords ensuring everyone gets the support they need at this very difficult time.”

There will also be no new possession proceedings through applications to the court starting during the crisis.

During prime minister’s questions yesterday, Boris Johnson said the government was prepared to bring forward emergency legislation to protect private renters from eviction.

At the time he said: “We will be bringing forward legislation to protect private renters from eviction, that is one thing we will do but it is also important as we legislate that we do not pass on the problem so we will also be taking steps to protect other actors in the economy.”

Marc von Grundherr, director of letting agent Benham and Reeves, said: “We’re all for state support at a time of crisis however there’s a significant unintended consequence of this announcement and that is the fact tenants now have nothing to lose if they simply stop paying their rent.

“It will simply be used as a literal get out of jail free card for all of the UK’s 16m or so private and social housing tenants and this could leave a path of destruction within the rental market if not correctly implemented and monitored.

“Let’s see what the details reveal but at first glance, this perhaps goes too far unless there are specific criteria that must be met and proven before tenants stop paying and landlords claim their mortgage holiday.

“Ultimately, landlords will still have to pay as this approach is a deferral, not a let off. How will they recoup the rent if tenants are unable or simply refuse to pay it?”

The developments come after chancellor Rishi Sunak announced on Tuesday a £330bn war chest of loans to protect businesses against the financial difficulties caused by the coronavirus.

He also announced mortgage lenders would be forced to provide up to three months’ relief from mortgage payments to consumers who needed it.

This dwarfed the £30bn of government funds announced at the Budget last week.

Meanwhile the spreading coronavirus crisis has caused global markets to tumble as governments across the world shut their borders, locked down domestic travel and closed sports and leisure facilities.

The prime minister has urged everyone to avoid unnecessary social contact, to work from home where possible, and to stay away from pubs and restaurants.

Schools will be shut from Friday afternoon onwards and will remain closed until further notice except for children of key workers and vulnerable children.

Examples of these workers include NHS staff, police and supermarket delivery drivers who need to be able to go to work to support the country’s fight to tackle coronavirus.

By Amy Austin

Source: FT Adviser

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Mortgage payment holiday: how the three-month coronavirus payment break will work – and what happens to renters

Mortgage payers who are facing financial difficulty due to the current coronavirus pandemic are to be offered payment holidays of up to three months, the government has announced.

Chancellor Rishi Sunak made the announcement on Tuesday 17 March as part of emergency measures designed to protect households amid the virus outbreak.

Three month reprieve on payments

A number of mortgage lenders have already announced repayment holidays for borrowers affected by coronavirus, but the government’s announcement on Tuesday (17 Mar) now means all lenders will have to honour the three month time frame.

The measure comes in an effort to ease the financial burden for households, meaning borrowers will not have to pay anything towards mortgage costs “while they get back on their feet”, the Chancellor said.

The news comes after the Chancellor revealed the government is to offer £300 billion of government-backed loans to support businesses through the coronavirus pandemic.

The loans are equivalent to 15 per cent of GDP and include schemes for businesses in hospitality, retail and leisure sectors, such as airlines and airports.

Stephen Jones, UK Finance chief executive, said: “Monthly mortgage payments tend to be the largest outgoing for the vast majority of households and lenders are keen to reassure homeowners 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.”

How will the mortgage holiday work?

In response to the government’s announcement, UK Finance, which represents financial firms, has outlined how the mortgage payment holiday will work.

The mortgage repayment is deferred for a period. The monthly payment changes to zero, and interest accrues for the period.

Where repayments are deferred for a time, the borrower will need to make up these repayments in the future, which could be over the remaining term.

Will everyone get an automatic three-month payment holiday?

Firms will help customers in the best way possible for the individual, so an automatic payment holiday may not always be the most suitable approach and may not be required by everyone.

Firms will be speaking to credit reference agencies to ensure consistent treatment of those customers to whom a repayment holiday is made available.

What if I don’t own my property but I rent instead?

The Prime Minister has said that tenants will be protected from eviction during the coronavirus outbreak.

With quarantine measures and illness likely to force many people out of work in the coming weeks, new legislation is to be introduced to prevent this from leaving those unable to pay their rent homeless.

The emergency legislation will prevent landlords from beginning the proceedings to evict tenants for at least the next three months. This applies to both renters in social and private accommodation.“As a result of these measures, no renters in private or social accommodation needs to be concerned about the threat of eviction” the statement says.

The legislation is expected to pass through Westminster and be consented to by Holyrood within the coming week.

UK Finance has advised renters to contact their landlord or managing agent if they have problems paying your rent.

If you are a landlord and your tenants are unable to pay their rent you should contact your lender as soon as possible to discuss the options that may be open to you.

How do I apply for a payment holiday?

Lenders are offering customers who are up-to-date with their mortgage payments, and impacted by coronavirus, the ability to self-certify if they need help.

Under usual circumstances, the lender would have to assess the customer’s finances and consider what options may be the most suitable.

This is being waived to allow firms to implement a more straightforward process in an otherwise stressful time.

It is important that customers who believe they may be impacted, either directly or indirectly, contact their lender at the earliest possible opportunity to discuss if the payment holiday is a suitable option for them.

Is everyone eligible for a payment holiday?

The offer of a payment holiday can be made available to customers not already in arrears and up-to-date with payments.

Under Financial Conduct Authority (FCA) rules, lenders must ensure that any forbearance that is offered will enable borrowers to recover through full repayment of arrears.

Lenders must also minimise the long-term impact of arrears and ensure the mortgage remains affordable and sustainable.

Overall, forbearance needs to minimise the risk of repossession. This is why payment holidays are generally short-term.

For customers who are already in arrears or in financial difficulty, lenders will consider the full range of options ordinarily available to customers under existing rules.

What about people who may need support longer term?

While the payment holiday is in effect, the capital sum of the loan remains as is, while the interest that would have been paid accrues.

At the end of the payment holiday period, the rules will re-apply. Lenders will get in touch with customers to assess their circumstances, including income and expenditure, and come to an arrangement with the customer to enable recovery through the full repayment of the arrears.

If the customer is in financial difficulty, lenders will come to an arrangement to recover the customer into a sustainable position on the mortgage. Any arrangements will aim to minimise the risk of repossession.

What if I’m already in arrears?

You should continue to speak to your lender. Lenders will review existing arrangements if there is a change in circumstances.

By Claire Schofield

Source: Edinburgh News