The FCA’s proposals to help borrowers when the payment holiday scheme comes to an end “do not go far enough”, Money Advice Trust has warned.

The charity that runs National Debtline has welcomed the FCA’s clear recognition in today’s proposed guidance for mortgage lenders that some customers will continue to face financial difficulty and uncertainty beyond the end of October.

However, it warns that the proposals do not go far enough to protect many struggling households from repossession when the current guidance ends.

Director of external affairs Jane Tully says: “The FCA is right to emphasise the need for specific protections for these households, including preventing firms from repossessing in cases where mortgage arrears were incurred solely a result of coronavirus payment deferral.  

“However, this guidance may not be enough to prevent serious mortgage difficulty for many. 

“The regulator could go further by requiring lenders to continue offering specific protections to customers impacted by the outbreak – including requiring firms to offer further targeted payment deferrals as ‘forbearance of last resort’ in some circumstances.  

“Ultimately, however, under our current system there is a limit to what the FCA and lenders can do, on their own, to prevent repossessions.

“The government needs to step up by closing the gaps in the mortgage safety net by reforming the Support for Mortgage Interest scheme – including reducing the 39 week wait for payments to13 weeks, and increasing the £200,000 mortgage cap that was set 11 years ago and has not been updated since.”

Also responding to the regulator’s draft proposals, UK Finance managing director of personal finance Eric Leenders says: “The industry has provided unprecedented support to customers as part of its clear plan to get Britain through the coronavirus crisis. 

“As we begin to arrive at a ‘new normal’, a more tailored approach to customer support using a range of measures will likely be more suitable for those customers who continue to experience financial difficulties or find themselves newly affected by the ongoing crisis.  

“It is important for customers who are able to  resume their mortgage payments do so, however lenders are fully prepared to support any customers who face difficulty and it is vital that those who are facing payment difficulties get in touch with their provider as soon as possible.”