Protecting your finances with a mortgage holiday during the pandemic
A recent survey by the Joseph Rowntree Foundation revealed that a staggering 1.6 million households are worried about how they will pay their mortgage over the next few months.
Over half of the households surveyed expect to see a drop in earnings over the next month, highlighting widespread financial insecurity amongst mortgage holders. With more than two million mortgage holidays granted since the scheme came into effect in March, the announcement earlier this week by the Chancellor that the mortgage holiday scheme will now continue for a further three months, was a welcome one.
If your earnings have been affected by the pandemic since earlier this year, or have done so recently, here’s where you stand in terms of requesting up to the maximum mortgage holiday policy allowance.
What does this mean for me?
If you have already taken a mortgage holiday, but are now paying your monthly mortgage payment as normal, then you will be allowed to take another of up to three months, if you need to.
If you are currently taking a mortgage holiday, then once the three months ends, you will be eligible to continue deferring payments for another three months.
If you haven’t needed to take a mortgage holiday as a result of the pandemic as of yet, but think you may benefit from the extra support, then you will be eligible for up to two mortgage holidays up to a total of 6 months.
All requests can be made up until 31 January 2021, when the scheme ends. Some lenders have expressed their willingness to help extreme cases after this period, on a discretionary basis.
Will taking a payment holiday affect my credit score?
This is an issue that we reviewed earlier in the year, following the first mortgage holiday announcement. The FCA has confirmed that during a payment holiday your credit rating is NOT affected because it is not classed as a ‘missed payment’. Any pause in payments outside of an arranged mortgage holiday however, could have a detrimental effect on your ability to access credit in the future, so it is essential that you keep in touch with your lender and make a plan for when your mortgage holiday eligibility comes to an end.
When the scheme is finalised, it’s worth remembering the banks will not have any legal obligation to help out, and any missed payments will be classed as defaulting. Consider your immediate options before applying, and bear in mind the additional interest that will be added onto your mortgage term.
Source: gov.uk