In new temporary guidance, the regulator said that borrowers with these sorts of mortgages, which have matured recently or are set to to mature soon, should be allowed to delay the repayment of the capital on their mortgage, so long as they are up-to-date with payments.

The FCA argued that there was a “significant likelihood” in the current environment that these borrowers would be struggling to make decisions.

It continued: “By enabling borrowers to take advantage of this guidance it should help avoid situations in which borrowers may struggle to realise their repayment strategy or may be concerned that they would attain poor value if they needed to repay the capital on their mortgage in adverse market conditions.”

The regulator acknowledged that there had been some opposition from industry firms and trade bodies, who cautioned that borrowers may choose to delay repaying the capital on their mortgage unnecessarily, which could lead to “worse consumer outcomes and future complaints if those borrowers still cannot repay by 31st October 2021”.

However, the FCA declared that lenders should make the risks of delaying capital repayment clear to borrowers, for example by highlighting the risk of property prices falling before next October.

“They should also explain that it is in the customer’s interest to repay now if they can as this will save them paying additional interest payments each month, and that ultimately any decision to delay is for the customer to make,” the regulator added.

Alongside the temporary guidance, the FCA has also confirmed it is proceeding with its plans to amend responsible lending rules so that lenders can choose to use a modified affordability assessment if a borrower looking to switch to a new deal, without borrowing more, was in a closed book within the same group as the lender.