Updated FCA guidance on mortgage payment holidays
On 17 November 2020, the Financial Conduct Authority (FCA) updated its guidance to lenders on dealing with mortgage holders impacted by COVID-19. Two sets of guidance have been issues:
Firms are instructed to provide struggling customers with support under the payment deferral guidance before moving to tailored support options.
What is a mortgage holiday?
A mortgage holiday, more correctly referred to as a mortgage payment deferral, is an agreement between a lender and a customer to temporarily change loan payment arrangements.
In its early response to COVID-19, the FCA issued guidance advising mortgage lenders to offer payment deferrals to customers who needed these. Deferrals made under these arrangements will not be reported as a default to credit referencing agencies. Customers on a full deferral can cease payments entirely for an agreed payment of time. Those on partial deferrals can make reduced payments as agreed with the lender.
Initially, payment deferrals would be issued for a maximum of 3 months. The latest guidance makes provision for payments to be deferred for a maximum of 6 months.
Who can apply for a mortgage holiday?
Payment deferrals are available to those who have been adversely affected by COVID-19.
Can customers with previous mortgage problems get a mortgage holiday?
Deferrals are equally available to customers with existing shortfalls or who have already benefitted from alternative forbearance measures. However, the FCA requires firms to make decisions that are in the customer’s best interests, and advises that a payment deferral may not necessarily be in the interest of a person with pre-existing payment difficulties.
How long will a mortgage holiday last?
Customers can defer up to 6 monthly payments in total. These can be offered in individual tranches, with each tranche being for a maximum period of 3 months.
As deferrals cannot extend beyond 31 July 2021, a customer who wishes to benefit from the full 6 months’ worth of deferrals must make the initial request for a deferral by the end of February 2021.
Tailored support for homeowners unable to get a mortgage holiday
The FCA’s tailored support guidance should be used by firms where a customer is experiencing financial difficulties but is not, or is no longer, eligible for a payment deferral.
The tailored support guidance impresses on firms that they should not seek to enforce payments or repossess property without using other short-term or long-term options to help struggling customers. These include the following in relation to mortgages:
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extending its term
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changing its type
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deferring payments due under it.
Mortgage repossession cases
The guidance advises that firms can commence or resume possession proceedings if they follow the set rules, including MCOB 13 and the pre-action protocol. However, firms should not seek to enforce repossessions until after 31 January 2021.
In Northern Ireland, the Chancery Master has issued guidance setting out expectations in regards to mortgage repossession cases in the High Court. This sets out that
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Actions which were stayed as a result of COVID-19 will continue to be stayed unless a reactivation notice is served on the court by 29 January 2021
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Any reactivation notice setting out an intention to relist the case must be served on all parties, including on Housing Rights where the organisation previously provided assistance
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Where a reactivation notice is received, the Master will hold an administrative review hearing at which parties will not be permitted to attend
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Parties will be given at least 6 weeks’ notice of any review hearing
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The party requesting reactivation of the case must provide an affidavit setting out the effect of the COVID-19 pandemic on the mortgage holder and his/her dependants.
Help with benefits and rates
The social security system can provide limited help with mortgage payments. This assistance is in the form of a loan and is intended to help with the costs of interest payments on the loan. It is available
- On application to people receiving Pension Credit
- 39 weeks after claiming Income Support, income-related Jobseekers’ Allowance or income-based Employment & Support Allowance
- 9 months after claiming Universal Credit, as long as you have not received any earnings during this period.
People who claim Universal Credit, but who also receive income from employment are not entitled to this loan.
Homeowners can apply for a rates rebate application to assist with rates payments if they receive Universal Credit.
Any homeowner who is concerned about paying their mortgage during this time, or about resuming payments at the end of a mortgage payment holiday should contact Housing Rights for assistance.
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