UK regulator Financial Conduct Authority (FCA) has revealed the details on its proposal to extend the availability of mortgage payment holidays to support struggling borrowers due to the coronavirus pandemic.
The news comes as England enters a second lockdown from 5 November to 2 December.
Last week, UK prime minister Boris Johnson revealed a host of new measures aimed at curtailing the rising number of COVID-19 infections.
Following the news of the second lockdown, the Treasury announced borrowers will be able to top their mortgage payment holiday to up to six months without this being recorded on their credit file. In response, the FCA said that it will propose updates on Monday 2 November, to its guidance on supporting mortgage borrowers.
Under the new proposal:
Borrowers who have not yet had a payment holiday will be eligible for two payment deferrals of up to six months in total.
Those who have an initial payment deferral will be eligible for another one of up to 3 months, even if they have resumed repayments.
Borrowers will have until 31 January 2021 to request a payment deferral and no one will have their home repossessed without their agreement until after that date.
Borrowers who have agreed alternative support with their lender or have already had two payment holidays of up to six months will not be eligible.
Previously, borrowers were told to apply for a mortgage payment holiday by 31 October as per an earlier scheme which has been extended multiple times since being introduced by UK chancellor Rishi Sunak in March.
The FCA is asking for comment on the proposals by 10am local time on 5 November, with the final guidance published as soon as possible after the comment period closes.
It said it is working closely with trade bodies and lenders to make sure the measures come into effect as soon as possible.
The regulator said consumers should not contact their lender about payment holidays until the new measures are in place and noted those who can afford to make repayments should continue to do so.
Sheldon Mills, interim executive director of strategy and competition at the FCA said: “It is in borrowers’ own long-term interest only to take a payment deferral when absolutely necessary. Those that are able to keep paying, should do so. This allows support to be targeted to those most in need.”
“We are working with lenders to ensure enhanced support remains available to borrowers struggling financially following changes in the coronavirus situation across the UK,” he added.
In September, the FCA announced tailored support for borrowers affected by coronavirus, which it would keep under review as the pandemic evolved.
It also said it considering the implications for consumer credit, which includes products such as overdrafts, personal loans and credit cards.
Consumer group Which? has urged lenders to “take a proactive approach” to ensure there is “adequate support available” for people who need it. Which? also called for the FCA to be “ready to intervene if there is any indication that customers are not getting the support they need quickly enough.”
Recent figures from UK Finance reveal around 162,000 mortgage payment holidays are in place, down from a peak of 1.8 million in June.
Additionally, a further 97,300 payment deferrals are in place on credit cards and 64,400 on personal loans.