Coronavirus and Mortgage Payment Holidays
The Covid-19 pandemic has created a seismic shift in the way the entire world is living their lives; from physical, to mental to financial. There has been unprecedented help backed by the UK government since earlier in the year. Whilst many people have been furloughed or lost their jobs financial worries are affected many hundreds of thousands of people.
A major concern is always paying the mortgage, often it is the biggest single expense that we pay each and every month. The ramifications of not being able to pay are serious and defaulting on payments could lead to losing your home.
Mortgage holidays are one of the ways homeowners have been safeguarding their finances in recent months. Early in March lenders agreed to offer forbearance on mortgages and loans secured on mortgages. These mortgages holidays gave lenders the ability to pause payments temporarily. Mortgage holidays have proven extremely popular with UK Finance stating that around 1.9 million customers taking advantage. Mortgage holidays due to Coronavirus difficulties are available until 31st October 2020 and usually last for 3 months.
It is important to understand that interest will still accrue over this time meaning you will owe more once you resume payments. If you can afford to pay some but not all of your mortgage speak to your lender who can agree to smaller monthly payments, this also benefits you in less interest being accrued.
Another consideration is the potential effect on your credit rating. It has been confirmed that mortgage payment holidays won’t be marked as missed payments on your credit file. This is effective only until 31st October, after that date your credit report will be affected.
You overall credit worthiness may be affected in the future as these mortgage holidays can be seen by other lenders who might deem your need to defer payments as a red flag. Unfortunately this is an unknown and only in the future will we find out the effects on someone’s ability to lend if they have taken a mortgage holiday.