Lenders commit to ongoing support for mortgage customers: FCA publishes final guidance

Tuesday, 17 November 2020 15:58

Banks and building societies will extend the provision of mortgage payment deferrals of up to a maximum of six months until 31 July 2021 Consumers have until 31 March to apply and will need to apply in good time before 31 January if they are eligible for and require a full six-month deferral Consumers who have had a full six-month payment deferral on their mortgage but continue to experience financial difficulty are encouraged to contact their lender...Request free trial

Banks and building societies will extend the provision of mortgage payment deferrals of up to a maximum of six months until 31 July 2021
Consumers have until 31 March to apply and will need to apply in good time before 31 January if they are eligible for and require a full six-month deferral
Consumers who have had a full six-month payment deferral on their mortgage but continue to experience financial difficulty are encouraged to contact their lender to discuss tailored support
The industry has so far granted 2.6 million mortgage payment deferrals since the start of the pandemic of which 140,000 are currently still in place
Lenders will not enforce repossession and should not seek, or enforce, a warrant for possession before 31 January 2021.

Lenders have today committed to renewed support for mortgage customers facing financial difficulty as a result of the Covid-19 pandemic, as the Financial Conduct Authority (FCA) confirms an extension to the mortgage payment deferral scheme until 31 July 2021, with final applications due by 31 March 2021. The extension gives access to customers who have not yet sought support, or who have had a payment deferral of less than six months.

A total of 2.6 million mortgage payment deferrals have so far been granted since the start of the pandemic. Just under 140,000 were still in place at the end of October. Of those mortgage customers whose payment deferral has come to an end, evolving industry analysis suggests that over 80 per cent have now returned to making repayments.

Customers will now have until 31 March to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to no later than 31 July 2021. Customers who are newly impacted by coronavirus and who want to benefit from the maximum six months available should apply in good time before their February 2021 payment is due. The final guidance allows payment deferrals that are not consecutive, including for customers in arrears or receiving tailored support.

The FCA has clarified that this updated guidance applies retrospectively from 1 November 2020, coming fully in to force on 20 November 2020. If a customer came to the end of a payment deferral between 31 October and when this latest amended guidance comes into force, and have not had six months of payment deferrals, they will be eligible to apply for a retrospective payment deferral to cover this period.

Eric Leenders, Managing Director of Personal Finance at UK Finance, said:

“Lenders are continuing to provide unprecedented levels of support to help customers through the Covid-19 crisis, with over 2.6 million mortgage payment deferrals already granted. As the impact of the pandemic continues to be felt across the country, the banking and finance industry stands ready to deliver ongoing assistance to those in need.

“All customers whose finances are impacted by the coronavirus will be eligible for a maximum of six months of payment deferrals on their mortgage. While it will always be in the long-term interest of customers who are able to do so to resume making payments, all lenders will be providing tailored support for anyone who is still struggling. There are a range of different ways to get in touch, including through online chat, social media and mobile and banking apps. As you will appreciate, phone lines are very busy at this time and we would encourage only those customers who are facing an immediate issue with their finances to call their provider in the first instance.”

Robin Fieth, Chief Executive of the Building Societies Association (BSA), said:

“Whilst the best advice is always to pay your mortgage if you are able to, anyone who is struggling to do this could benefit from the extension to the mortgage payment deferral scheme or other tailored support that is available from lenders. It’s important that customers discuss their situation with their lender as soon as they become concerned, and before they miss a mortgage payment. Lenders will do everything in their power to help borrowers in financial difficulty at this challenging time – keeping people in their homes is the objective.

“The FCA has been in listening mode throughout the pandemic and their final guidance includes industry suggestions, specifically the ability to top up to six months even if a borrower has had two shorter deferral periods already and not excluding borrowers who have missed a payment after a deferral period from the scheme.”

Interest-only and part-and-part customers whose mortgage matured between 20 March 2020 and 31 October 2020 can now also take advantage of a mortgage payment deferral after their mortgage has matured and will still be able to delay repaying their capital until 31 October 2021.

It will always be in the best interest of customers to resume making payments on their mortgage if they are able to do so. However, for those customers who have already taken a total of six months of payment deferrals and continue to need support, all lenders will offer tailored options, taking into account their personal circumstances including any local Covid-19 restrictions that may be imposed.

Firms will not enforce repossession and should not seek, or enforce, a warrant for possession before 31 January 2021, unless there are exceptional circumstances such as a customer requesting that proceedings continue.

Mortgage payment deferrals cover both individual borrowers and those with Buy to Let mortgages to allow landlords to pass on the benefit to tenants who may have been impacted by Covid-19.

Notes to Editor

The industry has put in place a clear plan to help Britain through the Covid-19 crisis:

Two and a half million mortgage payment deferrals
27 million interest-free overdrafts offered
1.13 million payment deferrals on credit cards and over 793,000 payment deferrals on personal loans
£57.3 billion of lending to over 1.4 million businesses through government Covid-19 lending schemes
Protecting customers from scams and fraud
Higher limit for contactless payments

All lenders will offer tailored options to support customers through payment difficulties resulting from Covid-19, taking into account their personal circumstances including any local restrictions that may be imposed. Support will be available both for those who have previously taken a payment deferral and those who are newly in financial difficulty.

Ongoing support for mortgage customers may include:

Extending the length of the mortgage term.
Changing the type of mortgage (e.g. a temporary change to an interest-only mortgage).
Deferring payment of the interest or the sums due
Capitalising the interest accrued, i.e. adding the added interest owed to the balance of the loan.

Updated Mortgage Payment Deferral timeline

31 January 2021: Firms should not enforce repossession and should not seek, or enforce, a warrant for possession before 31 January 2021, unless there are exceptional circumstances such as a customer requesting that proceedings continue.

February 2021: Customers who are newly impacted and wish to benefit from a full six-month deferral must apply before their February mortgage payment.

31 March 2021: Deadline for all mortgage payment deferral applications.

31 July 2021: The mortgage payment deferral scheme ends.

UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation.

The Building Societies Association (BSA) is the voice for all 43 building societies and 6 of the larger credit unions. Between them these organisations serve over 25 million consumers across the UK and since March 2020 have provided more than 450,000 mortgage payment deferrals (number is part of the total figure quoted above).