14 April 2020
One in nine borrowers take payment holiday
While there have been complaints from some quarters that financial support for those affected by Covid-19 has been slow in coming, one area where banks seem to have got it right is when it comes to mortgage payment holidays.
Trade body UK Finance reports that more than 1.2 million borrowers affected by coronavirus have been granted a mortgage payment holiday, equating to one in nine of all mortgages. For the average mortgage holder, this is a saving of £260 per month for three months, while many will be able to extend the scheme for a further three months if required.
Lenders should be applauded for enacting government policy within a relatively short period of time, particularly as it has been a big draw on their resources. The mortgage is typically most people’s biggest monthly outgoing. For someone with income or employment issues brought on by the pandemic, a payment holiday can be invaluable in covering short-term cashflow issues.
However, borrowers should remember that this is not ‘free’ money. During the payment holiday, interest is added to the mortgage and will be owed afterwards.
With approximately 11 million mortgages in the UK, there is potentially some way to go in agreeing a mortgage payment holiday for everyone who needs it. But not all borrowers have been affected to the same extent by coronavirus so if you are able to do so, consider maintaining your mortgage payments at the usual level or even partial payments.
Speak to your lender first before making any decisions with regard to taking a payment holiday. Agree to a way forward and remember not to cancel anything until it has all been agreed – otherwise, it could impact your credit rating, which could cause you issues long after we return to ’normal’.