COVID-19: FCA confirms extension of availability of mortgage payment holidays

The Financial Conduct Authority (FCA) has issued updated guidance to firms, which comes into effect on 4 June 2020 and will remain in force until 31 October 2020. This extends the deadline for requesting a mortgage payment until 31 October, and sets out the approach that firms should take to assist customers who have already requested a break in payments. Customers who had a payment holiday end before the guidance came into force should approach their lender again to ensure that their treatment was consistent with the new guidance. 

Customers who have not yet had a payment holiday

Customers who are in financial difficulties as a result of COVID-19 can request either a full or partial deferral of mortgage payments. The firm should agree to this request for 3 monthly payments, unless the firm has agreed a alternative approach to dealing with the customer's financial difficulties which is reasonably considered to be in the customer's best interests. 

A payment deferral may not be in the customer’s best interest if the customer is already in payment shortfall.   

The firm is obliged to ask if the customer would be interested in a payment holiday if the customer provides information suggesting that they are currently experiencing financial difficulties as a result of COVID-19, or that they expect to be in this position shortly. Firms are not required to satisfy themselves as to the customer's payment difficulties, but can do so if they choose, as long as this doesn't cause undue delay. 

What other options can firms consider?

Mortgage firms can consider alternative methods of assisting a customer, including:

• offering a payment deferral of fewer than 3 months
• offering the customer a sustainable longer-term solution, such as an extension of the term or an alternative product
• offering more favourable forms of assistance to the customer, such as reducing or waiving interest

The guidance states that a firm should offer a payment deferral at the level sought by the customer if the customer and the firm have been unable to agree on how much the customer can afford.

Firms should provide customers with a reasonable estimate of the impact of a payment deferral on their future liabilities.  

Customers who have already had a payment holiday

Firms are required to treat those customers coming to an end of a payment holiday fairly, and to distinguish between customers who:

• can resume full payments immediately
• are currently unable to resume full payments due to circumstances arising out of coronavirus
• have a payment shortfall.

If a customer cannot resume full payments, the firm should consider a further full or part deferral of payment for 3 months, or an alternative arrangement such as those set out above. 

Other credit payment holidays

The FCA has also made changes to its rules requiring that certain other forms of credit providers also offer forbearance to customers who are struggling as a result of the current crisis. This includes providers of

• personal loans
• credit cards
• motor financing arrangements
• overdrafts
• certain short term credit arrangements. 

Insurance providers are also required to treat customers who are struggling as a result of COVID-19 fairly. The FCA guidance to insurance providers recommends considering options such as deferring payment of premiums, reviewing a customer's needs in order to reduce premiums, waiving cancellation and other admin fees.

Customers who are in financial difficulties can discuss these options with their lenders. If the lender is unwilling to help, speak to a free and competent debt adviser. Visit Advice NI's website for lists of local advice agencies. Never pay for debt advice.

Customer who are struggling to pay their mortgage or other housing costs

Clients should contact Housing Rights for advice if you are struggling financially as a result of COVID-19, or for any other reason. You should always pay what you can afford to your lender. Contact our helpline on 028 90245640 to get advice on your options.