The FCA has confirmed that its new guidance for dealing with borrowers who face continued difficulties as a result of the pandemic will come into force on September 16.

Under the measures, the regulator expects firms to offer tailored support to borrowers in order to ensure that individuals’ needs are met.

This could include extending the repayment term, reducing repayments, lowering interest rates or restructuring a mortgage onto part interest-only.

The watchdog makes particular mention of second-charge borrowers, warning that capitalising deferred payments on the higher interest rates associated with such loans may not be the best outcome for customers.

It also makes clear that borrowers who missed payments or seek deferrals after the industry-wide covid deferral scheme ends on October 31 should be reported to credit reference agencies as normal.

FCA interim chief executive Christopher Woolard says: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. 

“Consumers in these situations will benefit from firms providing them with tailored support.

“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”

Step Change director of external affairs Richard Lane says: “We agree entirely with the FCA’s assessment that many customers will continue to need ongoing support and forbearance beyond the previously agreed payment holidays. 

“We are not out of the woods in terms of people’s vulnerability to financial difficulty arising from the pandemic – such as job losses that haven’t even happened yet. Public support needs to complement regulatory support; now would be a good time to consider restoring support for mortgage interest back to its previous status as a benefit rather than a loan.

“It’s never been more important for firms to remember that repossession should only ever be a last resort. 

“At Step Change, home owners who need debt advice are able to access not just our normal debt advice service, but also our specialist mortgage debt advice team. 

“This means that all possible options to resolve their debt situation can be explored, including whether remortgaging or equity release may be an appropriate strategy for certain households.”