The Financial Conduct Authority’s announcement that the payment holiday period has been extended by a further three months is good news for homeowners whose finances have been affected by Covid-19.
The end of this month would have seen the early adopters of the scheme having to make their first mortgage payment, so this further extension gives them some much-needed extra breathing space.
The FCA has also announced that new applicants will be able to keep requesting a mortgage holiday until 31 October, and that an existing ban on home repossessions will be extended to the same date. Meanwhile, the government has also announced the ban on evictions for private and social tenants has been extended by a further two months to 23 August.
I’ve been a supporter of the payment holiday scheme since it was originally announced back in March and my opinion of it hasn’t changed since – it’s essential that we continue to support customers as much as we can.
I’ve said from the start that if the original three month period wasn’t going to be long enough, then I’d rather see it extended further than see people going into arrears. It’s bad news for everyone if customers start going into arrears as lenders would have to provision against those arrears going bad, which would in turn consume capital and slow down lending appetite.
If you’re a non-bank lender I can understand it could be a problem because you don’t have access to retail deposits to fund out that liquidity position like a bank lender. However, UK Finance and the regulators are looking at ways to support the non-bank lenders, and I’d be supportive of that move as well.
Of course customers need to be aware that a payment holiday may not be the best solution. Their mortgage will still be accruing interest and they will still have to repay their deferred payments back at a later date. Brokers can play an important part here, helping customers understand the various options available to them so that they make the right decision based on their circumstances.
At the very least the scheme gives borrowers some respite until things are back to some semblance of normality and they’re back on their feet financially.
Protecting people when they could be at their most vulnerable should be a priority, so it’s reassuring to see measures have been put into place which will give homeowners and tenants invaluable security during these turbulent times.
Alan Cleary, managing director, OneSavings Bank
