FCA

Borrowers who immediately took a mortgage holiday could face repayments beginning at 'difficult time'




The FCA has published new guidance for mortgage lenders and administrators and small business lenders in light of the Covid-19 crisis.

It stipulates that firms should grant borrowers a mortgage payment holiday for an initial period of three months, where they may experience payment difficulties as a result of coronavirus, and where they have requested for one.

Lenders should also ensure there is no additional fee or charge (other than additional interest) as a result of the payment holiday.

In addition, the government has extended the mortgage payment holiday to BTL landlords.

Lenders will offer a mortgage holiday of up to three months for landlords whose tenants have been impacted by coronavirus.

This aims to alleviate the pressure on landlords, who will be concerned about meeting mortgage payments themselves, and will mean no unnecessary pressure is put on their tenants as a result.

After this, landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.

“As we suspected, the government has worked with lenders to successfully extend the three-month mortgage holiday to BTL mortgages,” says James Tucker, CEO at Twenty7Tec.

“This means that there’s parity across the vast majority of mortgage holders now and it marries with the government’s ‘do not evict’ strategy which has also just been released.

“We’re still seeing high volumes of demand for searches and documents to be produced each day across product groups. 

“Lenders have adapted quickly to the new market circumstances and we think we’ll see more innovation as the hours and days go by.

“I’m really proud of how our industry has risen to this challenge.”

The regulator has also set out guidance for firms participating in the government’s Coronavirus Business Interruption Loan Scheme, which was announced by the chancellor last week.

The scheme supports lending to SMEs impacted by coronavirus of up to £5m. 

However, loans of up to £25,000 to sole traders and unincorporated enterprises can fall within the scope of FCA regulation.

The guidance from the watchdog specifies that lenders may take into account appropriate evidence, including historic trading figures as well as future forecasts and, if forecast income does not materialise, finance providers should consider deferring repayments until it does.

How does the industry view these changes?

Joshua Elash, director at MT Finance, said the chancellor’s measures “will go a long way” to assisting homeowners.

He stated that, while the measures were less relevant for the unregulated sector, MT Finance would continue to work with borrowers if they experienced payment difficulties.

Both Miles Robinson, head of mortgages at Trussle, and Mark Harris, chief executive at SPF Private Clients, felt it was important for clients to communicate with their lenders should they face payment difficulties.

“The good news is that mortgage lenders don’t live under a rock,” said Miles.

“They know that coronavirus is causing severe uncertainty.

Mark added: “…The message to borrowers, particularly the self-employed who are most likely to be affected in terms of their income, is that anytime you are struggling to pay your mortgage, get in touch with your lender. 

He emphasised clients should get in contact as early as possible.

“Don’t bury your head in the sand and hope the problem will go away — it won’t.”

James said that it was very hard to say precisely how things would end up, considering we haven’t seen the height of the challenge.

“…Anyone who immediately took a mortgage holiday currently faces repayments beginning again at a very difficult time,” he stated.

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