The UK government quickly introduced a number of financial measures to offer relief to those households that had been affected by covid-19. Many will be taking advantage of a three-month mortgage repayment holiday to help ease their household cash flow during this unprecedented time.
Mortgage payments are one of the largest expenses of any household in the UK, with the average home spending around £671.23 per month on their mortgage, but mortgages costing £2,000, £5,000 or £25,000 depending on the size of your property and the amount you have borrowed.
As part of an FCA announced in March 2020, all UK banks and mortgage lenders must provide their customers with up to three-month’s worth of payment holidays, which will give the average household a saving of around £2,100.
You do not need to have coronavirus to be eligible, but you need to demonstrate that you have been affected financially as a result, either as a homeowner or landlord.
Will I get charged extra if I take a mortgage holiday during coronavirus?
If you successful take a mortgage payment holiday under the current scheme, the actual capital balance you have left to pay will stay the same.
However, you will still be charged interest over the three-month period, which means your total balance will increase overall and you will end up paying more over the course of your mortgage. The arrangement will vary between lenders and some are charging a small administration fee and some are not charging at all – read more about coronavirus mortgage payment holidays.
To offer additional relief, mortgage providers will not be making any repossessions during this time – so for anyone with a history of missed payments and on the verge of losing their home or property, this is not a concern.
In addition, taking a mortgage holiday will not affect your credit rating during covid-19, whereas usually taking a mortgage repayment holiday will negatively impact your overall credit score.
Am I eligible for a mortgage holiday during the coronavirus?
You do not need to have coronavirus to be eligible, but you may need to demonstrate that you have suffered a loss of income or are experiencing some form of financial difficulty.
For homeowners, the payment holiday should be seen as a short-term solution and not part of a longer term way to avoid paying off your mortgage. For those mortgage owners who have been struggling with payments for some time, your bank may take this into consideration.
Certainly for landlords, they may be relying on income from a number of tenants, who may be having financial difficulty, in which case any proof of this would be eligible for a payment holiday. Landlords are expected to pass down any halting of payments to their tenants too.
How to apply
You can apply for a mortgage payment holiday directly with your bank and this can be completed online. There is a fast-tracked and streamlined process available at the moment which is designed to provide quick approval and your mortgage holiday can be issued very speedily.
The bank does have the right to deny your request if it is not in your best interests – and may offer alternatives such as a remortgage or interest-only mortgage to reduce capital repayments.