It has been announced that the mortgage holiday introduced in March is being extended with applications open until January 31 2021. This mortgage repayment holiday scheme enables people to put a hold on mortgage repayments for up to, and not exceeding, six months.
Over 1.2m people have already taken advantage of mortgage payment holidays after banks were instructed to offer them to customers. It was part of a package of measures to help people affected by the pandemic. Initially borrowers could take a three-month holiday and this was then extended to 6 months.
The take up was huge – with UK Finance reporting one in nine mortgage customers have benefitted from this scheme. It enabled a vast number of people to take a break from what is usually their largest outgoing, giving them breathing space if they were on a lower wage, for example on Furlough, or have lost their job.
Landlords have been reassured by the Government that they can benefit from the new extended mortgage holiday scheme. The Financial Conduct Authority (FCA) and the Ministry of Housing have updated their websites to clarify that buy-to-let borrowers are also covered by its new guidance during the pandemic. This means that landlords can ask their lender for a payment break for up to 6 months and applications will be open until the end of January.
If you have already taken a three-month mortgage break this means that you can extend it for another three months. If you have already taken a six-month break, you have reached the maximum and will be unable to take a further repayment holiday.
The FCA says: “Borrowers, including those with a buy-to-let mortgage, who have been impacted by Coronavirus and have not yet had a mortgage payment holiday will be entitled to a six-month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.”
You should only ask for a payment holiday if you need one as interest will accrue and when the repayment holiday ends your monthly amount will go up and you’ll have more to pay off in the long run so the option should only be utilised by those who really need it. The increase will be to pay for the three or six months’ worth of missed payments plus the additional interest.
It’s important to note that if you want to take a holiday you MUST talk to your bank and apply for the holiday. If you simply cancel your direct debit this will be seen as non-payment and will affect your credit score.