Measures will be aimed at those who benefitted from payment deferrals and continue to face financial difficulties, as well as those who are newly affected by money problems due to coronavirus.
In its guidance on the next stage of support for mortgage borrowers, which comes into force on 16 September, the FCA said firms will offer further short and long-term support which ‘reflect the circumstances of the customer’.
This could include extending the repayment term, restructuring the mortgage or – for short term difficulties – continuing payment deferrals or reducing payments for a specified period.
Credit scoring
Customers who have been on payment holidays and benefit from additional support post October 31, however, will see this reflected in their credit score, the FCA said. This is to ensure future lenders can gain an accurate picture of their profile and enable them to lend responsibly.
Firms are also being advised to signpost customers with difficulties to the support they need either through self-help methods or money guidance.
The FCA said firms must prioritise support for borrowers who are at most risk of harm, or who face the greatest financial difficulties.
What’s more the regulator said firms must support customers as individual borrowers rather than adopting “one size fits all” solutions.
And it said it would be monitoring firms to ensure borrowers were treated fairly having regard to their individual circumstances.
Christopher Woolard, interim chief executive at the FCA, said: “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.”
Industry reaction
David Thomas, chair of the Society of Mortgage Professionals, said: “As we move from lockdown to social distancing, there will continue to be significant upheaval for most sectors of the economy. Some changes in individual circumstances will be temporary, while others will be longer term.
“It makes sense, therefore, that the guidelines that were drawn up for a lockdown situation should be changed.
“People who can resume payments should do so, to avoid building up interest unnecessarily, while people who continue to need support should be given as much help as possible. The new FCA guidance is well-positioned to achieve this.”
But Gemma Harle, managing director of Quilter’s advice network was concerned about the impact on struggling borrowers’ credit files and that it could make it harder for them to borrow in the future.
She added: “Extending the term of a loan means it will cost more over the lifetime of the product so it is a decision that requires careful thought. For most people it will only be the right move if they face imminent financial difficulty and it is always worth if possible discussing your options with a professional.
“This guidance does however show that the FCA is still very much encouraging lenders to support their customers who may be struggling to meet their payments.
“Some of the mechanisms being encouraged in relation to forbearance include applying simple interest rather than compound to any payment shortfall or reducing the interest rate charged on these sums in some cases to 0%. This will help customers avoid spiralling into an unsurmountable mountain of debt.”
