Homeowners struggling to make their mortgage payments have been thrown another three month lifeline by the government.
The Treasury were concerned that an abrupt end to the scheme, which started in March, could produce a cliff-edge effect with borrowers being faced with money problems even worse than they had when the virus first struck.
The deadline for the first applicants was June so the Treasury decided to act to give them surety about what would happen next.
However, they warned that borrowers should bear in mind that payments will have to be made at some time in the future and they will be faced with higher monthly bills once the ‘holiday’ is over.
Financial Conduct Authority (FCA) interim chief executive Chris Woolard said that any customer able to restart payments should do so as it would be ‘in their best interests’.
Stephen Jones, chief executive of the banking trade body UK Finance, added: “Mortgage lenders are committed to providing those borrowers nearing the end of their three-month payment holiday with help and flexibility in choosing the next steps which best suit their needs.
The industry looks forward to regulatory guidance being finalised swiftly to ensure both borrowers and lenders can plan over the coming weeks.
“Meanwhile those borrowers who have already taken a mortgage payment holiday and can afford to make payments are encouraged to do so, as this will reduce the level of their repayments in the long run.
“For those borrowers who have not already applied for a mortgage payment holiday, the industry supports the extension of the availability of payment holidays until 31 October 2020 as this will provide much-needed breathing space for borrowers who need it.
“Lenders are also committed to the moratorium on involuntary repossession to ensure no homeowner loses the roof over their head because of COVID-19 related repayment difficulties.
“A payment holiday may not be the right choice for everyone, and borrowers should only apply if they need one. We would encourage any borrowers concerned about their financial situation to check with their lender, starting by looking at their website which will have the latest information on the support available.”
Economic Secretary to the Treasury John Glen says: “We’re doing everything we can to help people with their finances at this difficult time, and that includes making sure people get the support they need with their mortgages. That’s why we’re working with the banks and lenders to extend payment holidays if people need them.
“Everyone’s circumstances will be different, so when homeowners can pay some or all of their mortgage, they should work with their lender on a plan. But if they are still struggling, I want them to know that help is there.”
Money Advice Trust, the charity which runs the National Debt Helpline, welcomed the holiday extension but warned government that renters need help too.
Chief executive Joanna Elson said: “People in private rented accommodation are among the most exposed to financial difficulty in the wake of the outbreak, and the government should listen to calls to help people meet their rent payments by increasing the Local Housing Allowance rate to cover 50% of average market rents.”
Mortgage lenders will contact the 1.8 million customers who have applied so far for an average monthly amount of £755 to discuss the options available to them.
A government spokesman said: “Some may be able to resume their full monthly payments. Others may be able to pay a proportion of their monthly payment, or temporarily switch to an interest only mortgage, or they may opt to extend their mortgage payment holiday.”