The Financial Conduct Authority has put forward proposals to extend the availability of mortgage payment holidays and ban repossessions until 31 January 2021.

This support is designed for borrowers who are experiencing payment difficulties because of coronavirus and should only be taken as a last resort.

At the moment 162,000 mortgage payment deferrals are in place, down from a peak of 1.8 million in June.

Who can apply for a payment holiday?

If borrowers have not taken a payment holiday yet they can apply for up to two deferrals of up to six months in total

For those who have taken one payment deferral, they will be eligible for a second one of up to three months. This includes anyone who has resumed repayments after the first payment holiday.

Under the FCA’s proposals, borrowers would have until 31 January 2021 to request a payment deferral.

A payment deferral would not be reported as missed payments on a borrower’s credit file. But this does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.

Who cannot apply for a payment holiday?

Borrowers who have already had two payment deferrals of up to six months in total will not be able to take any more and should speak to their lender about tailored support.

If customers have agreed alternative support with their lender, they are also not able to apply.

Tailored support may be reported on a borrower’s credit file and lenders should inform borrowers where this will be the case.

Regulator working with lenders

FCA interim executive director of strategy and competition Sheldon Mills says: “We are working with lenders to ensure enhanced support remains available to borrowers struggling financially following changes in the coronavirus situation across the UK.

“Tailored support will still be offered and remains the most appropriate option for many borrowers, but we are proposing to extend payment deferrals for additional support. We also want to make sure no one has their home repossessed during this time.”

“We are also asking borrowers not to contact their lender yet, and instead wait for further updates, including from their lenders, soon.”

The FCA is asking for comment on the proposals by 10am on Thursday 5 November, with the final guidance published as soon as possible after that.

Trade body support

UK Finance managing director of personal finance Eric Leenders comments: “Lenders are continuing to provide unprecedented levels of support to help customers through the Covid-19 crisis and have been working closely with the FCA to ensure that customers impacted by the new lockdown measures will be able to access the assistance they need, including being able to defer payments on their mortgages where this can help.”

Building Societies Association chief executive Robin Fieth adds: “We recognise that the ongoing economic issues being caused by the Pandemic are generating significant challenges for some households. Lenders are working hard to support their customers through this time.”