One in seven takes mortgage payment holiday

To date, more than 1.6 million mortgage payment holidays have been given to homeowners whose finances have been affected by the COVID-19 crisis.

One in seven mortgages is now subjected to a payment holiday, according to figures released by the trade body UK Finance. More than a third of all payment holiday approvements came during the first week of the nationwide lockdown, between March 25 and April 1. Almost 700,000 holidays were granted in April alone.

Breaks are in place for up to three months, and for the average mortgage-holder, this represents £775 per month of suspended payment. Credit reference agencies such as Experian and TransUnion have said that a person's credit score will not be affected by taking a payment holiday.

Lenders understand the financial pressures that many households are under because of the spread of the infectious agent and are helping their customers get through these difficult times.

Mortgage lenders are also waiving a rule to enable customers to move to another product when their fixed deals are up. Typically, customers on payment holidays who are coming to the end of their fixed deals would not qualify for a product transfer.

Should I Apply for a Mortgage Payment Holiday?

A mortgage payment holiday may not be right for everyone. Borrowers will still owe the money and interest will continue to accrue on the capital you owe. The overall mortgage debt will increase and, of course, will have to be paid off. This could mean that once you come out of the holiday period, your monthly payments could increase or you might end up with a slightly longer mortgage term.

Mortgage holidays are seen as a lifeline for borrowers who are facing financial difficulties because of the pandemic. Everyone's circumstances are different, and it is a good idea to seek advice if you're not sure whether a payment holiday is right for you. Alternatives are also available. For example, if you want to reduce your monthly payments, you may be able to remortgage to a cheaper rate.

"There is a range of support available to mortgage holders concerned about their finances," said Stephen Jones, UK Finance CEO. "We would encourage any homeowners impacted by coronavirus to visit their lender's website in the first instance to find out more information and how to apply."

May 2020